Howard Davidowitz: Luxury and online retail doing better than the rest

Howard Davidowitz, chairman of Davidowitz & Associates Inc., tells Bloomberg’s Pimm Fox that the companies doing the best in the retail space are the luxury retailers like Saks(SKS), Tiffany (TIF), Coach (COH). The implication is that we have two markets – one for the well-to-do, who are back in business and one for other consumers who are still hurting. My own experience over the holiday season tells me it is not just high-end customers buying  at Coach stores. Every Coach outlet I saw was crammed with shoppers. Apparently, consumers with jobs feel confident enough to spend on holiday shopping – even on luxury goods.

Davidowitz also discusses the performance of Sears Holdings Corp. (SHLD), mergers in the retail space, prospects for online retailers like Amazon (AMZN)and mobile shopping, and commercial real estate. The real story of the holiday season was the move to online retailers. I suspect we will see a blowout quarter from Amazon next month. This is deflationary over the long term; Fox and Davidowitz talk about the trend to in-store online price comparisons for example.

Davidowitz has been bearish on retail even as it has done well. His long-term view – which I share – is that US consumers are burdened by debt and will be looking to deleverage for some time to come. See the Bloomberg interview in August for more on that theme. My question is whether one should be short-term bearish on retail in a cyclical upturn and how to express that view. If you were short retail this past year, you lost a lot of money.