GO
Loading...

Department Stores on 'Death Spiral': Hedge Fund Manager

Retail is a "lead indicator for the S&P"and the broader market, David Berman, founder and president of the retail-based hedge fund Durban Capital, told CNBC on Wednesday.

Getty Images

"Everyone gets excited about department stores—Macy's, Dillards , J.C. Penney, Kohls —the problem is that the department stores are really on a long-term death spiral," Berman said.

"In the short-term, of course, these stocks could go up a lot, but in the long-term, the off-prices and the discounters, Costco for example, that's the way to go," he said.

"And then you have Amazon and you've got Apple—Apple was about a quarter of the total sales growth of America in the last quarter," Berman said.

"Wal-Mart is 24 percent of total sales in the United States," he added.

Inventories at Wal-Mart are growing much faster than sales. The retail giant is essentially trying to increase their items for sale to offer more variety to the customer, Berman said.

"Last year in March, April, the sales in America went through the roof...and so did the stock market afterwards. Then sales slowed down around late April, May, so of course the retailers went down and the market then followed it," he said.

"Now what is really interesting that happened, was that in the summer everyone was nervous and sales were much better than people thought," Berman said.

"The stock market is essentially following the retailers and will continue to do so," he concluded.


Watch CNBC's "The Strategy Session" weekdays at Noon ET.


Symbol
Price
 
Change
%Change
AMZN
---
COST
---
DDS
---
JCP
---
KSS
---
M
---
WMT
---
AAPL
---