Consumer demand should be pretty normal this holiday shopping season: Neuberger Berman's San Marco

Core Viewpoint - The holiday shopping season is starting with mixed signals from retailers, indicating a divide in consumer spending behavior, particularly influenced by discounting strategies [1][2]. Retail Environment - Retailers are facing challenges in balancing discounting to attract consumers while managing their profit and loss statements amidst inflation and tariffs [3][4]. - The demand for consumer goods is expected to remain stable, with a normal level of discounting anticipated during the holiday season [4]. Key Retailers - TJX is identified as a potential "poster child" for the holiday season due to its strong value proposition and historical resilience against economic fluctuations [6]. - The company is expected to benefit from increased consumer spending during tax refund season and potential improvements in housing activity [7]. Home Improvement Sector - The home improvement sector has been slow to recover, but stabilizing interest rates may help unlock pent-up demand [8]. - Existing home sales have remained flat for three years, which poses a challenge but could shift to a neutral position, benefiting companies like Home Depot that are expected to outperform the industry [9]. Inventory Management - Retailers are navigating a complex environment regarding inventory management due to uncertainties around tariffs and trade dynamics, which complicate planning and forecasting [10][11]. - The need for safety stock is emphasized as retailers aim to avoid markdown liabilities while being prepared to meet demand when it arises [11][12].