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By Jim Woods

It's only mid-October, and though the holidays still are over two months away, it's not too early to begin thinking about the holiday shopping season. More importantly for traders, it's not too early to think about the stocks that stand to benefit from the make-or-break holiday shopping season. It's also not too early to think about those stocks likely to suffer this season.

This year, there is a lot of optimism over what is expected to be a robust level of holiday retail spending. According to industry trade group the National Retail Federation (NRF), holiday sales are expected to increase by 4.1% to approximately $586 billion this year. The NRF 2012 holiday forecast is well above the 10-year average holiday sales increase of 3.5%; however, it is short of the 5.6% holiday sales surge we saw a year ago.

Some large retailers already are bracing for bigger sales by increasing their holiday staffing. For example, department store behemoth Macy's (NYSE: M) recently announced plans to hire an additional 80,000 seasonal workers for the holidays, which represents an increase of 2.5% over last year's seasonal hires. Other big retailers are doing the same, including online giant Amazon.com (Nasdaq: AMZN), high-end department store Nordstrom (NYSE: JWN), and the biggest retailer of them all, Wal-Mart (NYSE: WMT).

Yet for every company staffing up in anticipation of stronger holiday sales, there are many other retailers that are just hoping they can salvage what has been a lackluster -- and in some cases a disastrous -- year. For traders, this holiday season is likely to be replete with companies that do well, and that will give their respective stocks a tradable boost in the fourth quarter. For others, the season is likely to be one that sees flagging fundamentals and faltering share prices.

In the weeks to come, I'll be looking at some of my favorite stocks to buy on an anticipated holiday bounce. Today, however, I want to concentrate on a list of retailers to sell and/or steer clear of before the holiday season kicks in. These stocks all have their own particular reasons why they've fallen out of favor this year with both consumers and traders. But each saddled investors with losses in 2012, and in some cases, very big losses.

Here's my list of nine retailers to sell before the holiday season:

1. Abercrombie & Fitch (NYSE: ANF)

This fickle teen retailer is on one year, off again the next. This year, it's off. The company's had struggling sales over the past several quarters, but more importantly for traders, the stock has fallen some 33.5% year to date.

2. Aeropostale (NYSE: ARO)

Like Abercrombie, Aeropostale is suffering from a fickle teen buyer. Declining fundamentals and a 14% year-to-date drop in the shares make this retail stock a sell before the holidays.

3. Bebe Stores (Nasdaq: BEBE)

Some of the best-looking women I know buy their clothes at Bebe, but during the past year, it seems like these same women have found other places to get their fashion fix. Sales and earnings have declined sharply of late, and that's reflected in the 49% decline in the stock since the beginning of the year.

4. Best Buy (NYSE: BBY)

Perhaps no retailer has suffered more from the move toward online purchases than Best Buy. The electronics seller used to be one of Wall Street's darlings, but now the only hope for this stock seems like a buyout. Yet even if the company manages to find a suitor, I think a decline of 26% this year is reason enough to sell this loser heading into the holidays.

5. Big Lots (NYSE: BIG)

Consumers like bargains, especially during tough economic times. However, they also like buying higher-end brands at a bargain. They can do that at stores such as Target (NYSE: TGT), but not so much at Big Lots. The availability of deep discounts at other retailers has hurt Big Lots, and as such, traders have punished the stock to the tune of a 19% year-to-date decline.

6. Electronic Arts (Nasdaq: EA)

Video games used to be all the rage for the holidays, but the sector has struggled of late. Electronic Arts was once a go-to holiday winner, but no longer. The shares are down some 36% so far this year, a clear indication that the Street has shunned this game maker.

7. Guess (NYSE: GES)

Yet another fashion retailer subject to the whim of changing tastes is Guess. The company has had a tough time sustaining sales of its rather costly clothing, and that's been reflected in slumping revenue and earnings. The stock is down 15% this year, proving traders haven't shopped at GES in 2012.

8. J.C. Penney Co. (NYSE: JCP)

One of the old guard retailers struggling to gain footing this century, J.C. Penney has hired new management, changed its product mix and employed a lot of star power to endorse its brands. Yet despite those efforts, the stock still is down 26% year to date.

9. Perfumania Holdings (Nasdaq: PERF)

Fragrances are traditionally a good choice for holiday gift giving, but this year fewer and fewer people are buying their scents at Perfumania stores. Sales and earnings are down substantially, as is the share price, with a year-to-date loss of 38%.

If you own any of these stocks, now is the time to get rid of them and raise some cash so you can go shopping for more attractive retail stocks. In the weeks to come, I'll tell you which stocks make my list for the best gifts traders can give themselves this year, so stay tuned.

Disclaimer: Jim Woods does not personally hold positions in any securities mentioned in this article. StreetAuthority LLC does not hold positions in any securities mentioned in this article.

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Source: 9 Slumping Retailers To Sell Before The Holidays