Even if consumers feel stressed, they're spending, says fmr. Toys R Us CEO Gerald Storch

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What does it mean for next year? Let's talk about it with Jerry Sturch. He runs Sturch Advisors. He is the former CEO at Hudson's Bay and Toys R Us. He was also vice chair at Target. Jerry, listen, I am surprised a little bit by the turnaround recently last few weeks in Target

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stock. Maybe we can get to that, but your take overall on the numbers that you've seen so far for the holiday shopping season because it ain't over yet. This week, I can assure you there's a lot of people out there looking for bargains.

Gerald Storch (CEO) 00:32.160

Well, I've been saying it's going to be a strong holiday season all year. The consumer has really hung in there, growing 4% in sales year over year, month after month, after month, after month. There's no reason they're going to suddenly stop spending during the holiday time. So

Gerald Storch (CEO) 00:44.760

I still think we're on pace for a 4% to 5% increase year over year in holiday sales, very strong.

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Yeah, how would that Is that When you say 4% to 5%? Is that because of inflation and the dollar value of the same goods is is higher or is that just more people and more spending overall?

Gerald Storch (CEO) 01:04.840

Well, it's both. There's always inflation in sales. But, you know, people talk about sort of that K-shaped economy, you mentioned that earlier. I keep looking at the at the numbers, kind of looking at clouds trying to find animals. I don't see a K in there anywhere. You know, a

Gerald Storch (CEO) 01:18.440

K means sort of the wealthy people have done great and so they're going up and the the less wealthy people have done poorly and they're going down. That's not what the numbers say. Certainly the wealthy have done well, the stock market's been been great. may have made a lot of

Gerald Storch (CEO) 01:30.600

money, but they don't tend to spend the money by the way, they reinvest it. That's why everyone says the sales tax is a regressive tax. But they've done well. But meanwhile, people who don't make quite so much money, real wages are still up. Wages have ridden faster than

Gerald Storch (CEO) 01:42.400

inflation and they continue to spend. So it's not like a K, it's like a tree where the branches are both going up just at different rates.

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Jerry, your notes as it relates to home the home essentially home improvement retailers, whether it's Home Depot or Lowe's, you're not terribly bullish. You think the dynamics both around interest rates, but also just frankly housing starts and whatnot are not encouraging. And

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yet that K-shaped economy, I kind of agree with you. I think there's a lot of consumption going on. I think it's underappreciated and I think the global growth story is underappreciated. Why not Home Depot and Lowe's? I mean valuation wise and I know that's our job. But I from

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the trenches, what's your sense on where these guys are not hitting on all cylinders relative to other retailers that you love that have also had, I mean a Walmart, Costco, you can make an argument these guys had their two or three year run Well, it's an open-book exam.

Gerald Storch (CEO) 02:33.760

You don't need to use the think method to figure out what's going to happen here. You know, look back in time, you see the numbers they've been posting and what Home Depot and Lowe's have been saying. They're saying, "Look, people are doing the small projects, that's fine, but

Gerald Storch (CEO) 02:44.960

not the big projects." And they're very interest rate sensitive, tied to the housing industry, and we've seen there the level interest rates has held them back. That's true also for some of the home goods companies as well, like a William Sonoma, those kinds of companies as

Gerald Storch (CEO) 02:58.640

well. So, we I don't think that's going to change unless interest rates come down more and they've said as much Home Depot and earnings uh analyst meeting where they looked in forward into next year and said it's going to be slow. 3 1 2 3 0 0 0 0 0 0 0 0 0