UBS: These 6 factors could spell disaster for retailers this holiday season

According to UBS estimates, inventory growth has surpassed sales growth over the last four quarters. That suggests retailers are adding more inventory than they've been able to sell.

The firm expects retailers will push more promotions than usual in the fourth quarter to get rid of the extra inventory. Promotions put downward pressure on gross margins because retailers cut into the markup on their products.

E-commerce has continued to become a larger portion of the sales mix for retailers. According to UBS, online sales growth has surged to 25% in 2019 a six-year high.

The ongoing growth of ecommerce could also hurt margins for brick-and-mortar retailers, UBS said. As customers migrate to shopping online, brick-and-mortar sales are expected to fall. That means retailers are stuck paying the same fixed costs to operate physical stores while sales drop-off.

The US retail industry has been struggling to navigate the US-China trade war over the last year, and UBS expects tariffs to start having an impact on retailers.

Retailers warned that the most recent round of tariffs on Chinese imports would lead to price hikes. The US and China held deputy-level trade talks last week and the Trump administration moved to exempt hundreds of products from the upcoming round of duties.

Weather plays a pivotal role in how retailers choose which categories of clothing to sell during a particular season.

UBS expects the country will see above-average temperatures over the next three months, which could negatively impact apparel and footwear sales.

"Softlines companies plan to sell colder weather categories (e.g. sweaters and coats) during this time of year," the firm said. "When the weather is cold, it gets consumers in the mood to buy these items at full price. When the weather is warm, the opposite effect occurs."

The period between Thanksgiving and Christmas is typically one of the busiest times of the year for retailers. It's also a critical time for driving sales before the end of the fiscal year while consumers are primed to spend.

Thanksgiving falls on November 28 this year, compared to November 22 last year. That gives retailers six fewer shopping days for the upcoming holiday season.

"This could put pressure on retailers to sell more goods before Black Friday," UBS said in a note to clients on Monday.