"Flat sales this year would actually be considered good, since employment has gotten worse and the consumers more cautious," said Marie Driscoll, retail analyst with Standard & Poor's Corp. in New York. "Since inventory is worth 20 percent less the day after Christmas, retailers will play a game with each other as to who marks down prices first."

Stores will aim to have new, full-price merchandise sitting on their shelves when consumers come in with post-holiday returns or gift cards, Driscoll said

"Consumers will remain fixated on value throughout the holiday season, which will make the retailers promotional-minded," said Kim Picciola, senior retailing analyst with Morningstar Inc. in Chicago. "Retailers that can offer consumers the best value will win out."

Last year all stores panicked early and started slashing prices, but Picciola doesn't expect a repeat of that.

"Major retail chains now have better access to credit, but credit for smaller firms has been cut back sharply," said Scott Brown, chief economist with Raymond James & Associates in St. Petersburg, Fla. "There's been a shift toward more moderately priced goods likely to move much more quickly."

Not until jobs become more plentiful will consumers feel better about spending, said Brown. Rather than inundate their children with gifts, parents may decide to buy three or four items that they really want, he said.

From the stocks noted earlier, TJX (TJX) is recommended by Driscoll and Jaffe, while J. Crew (JCG) is a choice of Driscoll and Picciola. Wal-Mart (WMT) is recommended by Brown, Picciola and Driscoll. Best Buy (BBY) and Costco (COST) are also Driscoll picks.

Urban Outfitters Inc. (URBN), whose "lifestyle" apparel stores include Anthropologie, has unique merchandise and its sales have held up well. It is recommended by Jaffe and Picciola. American Eagle Outfitters (AEO) is a favorite of Jaffe based on its extensive assortment of casual apparel for teens and young adults.

Coach Inc. (COH), a premium accessories brand with an enviable reputation, is recommended by Driscoll. She also said that some of the brands of V.F. Corp. (VFC), such as The North Face and Vans, are solid sellers certain to boost results this holiday season.

Gap Inc. (GPS) should benefit from a turnaround at its Old Navy division, which has "gotten back into the DNA of young moms and their kids," said Jaffe. Driscoll agrees that Old Navy's aggressive marketing, improved product line and lean inventory bode well, but she still considers the company's Banana Republic division to lack proper focus.

Retailers will be promotion-minded without ruining profit margins this time.

"If a retailer wants to sell a cashmere sweater for $99, it will price it at $140 and then mark it down by 30 percent," Jaffe said. "It planned that promotion so it is still making full margin while moving merchandise out the door."