Luxury retail was the talk of the National Retail Federation's 2018 Big Show.
With shoppers perking up, the stock market rallying and new tax legislation likely to put more money back into consumers' pockets, conditions are favorable for many luxury brands.
Jerry O'Brien, director of the Kohl's Center for Retailing at the University of Wisconsin-Madison, told CNBC the tax cuts could result in a bigger gap between luxury retailers (i.e. Tiffany, Hudson's Bay, Neiman Marcus and Tapestry) and other players, though he said off-price brands will continue to outperform in 2018. This leaves the "middle ground" of the industry at risk, he added.
In a separate interview with CNBC, Rod Sides, vice chairman of Deloitte's U.S. retail and distribution practice, likened the retail industry to a bow tie. The two far ends of the spectrum — luxury, on one side, and off-price retailers and dollar stores, on the other — are seeing new highs, leaving everyone else in a "knot" in the middle.
Oppenheimer analyst Brian Nagel said during an economic roundtable that it will "take consumers time to get used to having [more] money in their pockets."
In other words, the transition won't happen overnight. He expects a slight impact, or more consumer spending, to trickle out into the first half of 2018, but the biggest impacts might not hit retailers until 2019, when shoppers become more comfortable in opening up their wallets even wider.
"Retailers are getting excited, but their plans are still not clear," Nagel said.
Neiman Marcus' outgoing CEO, Karen Katz, told CNBC that luxury brands had a strong holiday season and have a better outlook for 2018. Names like Kering, which owns Gucci and Yves Saint Laurent, and LVMH, the parent company of Louis Vuitton and Hennessy, could reap some of the biggest benefits from a tax windfall.
Kicking off the year on a high note, after three consecutive years of posting same-store sales declines for the holiday period, luxury jewelry brand Tiffany on Wednesday said its total comparable sales jumped 3 percent this past November and December.
"The consumer is strong and products are trending well here. ... These results indicate a favorable consumer spending backdrop which should continue into calendar 2018," Jefferies analyst Randal Konik said.
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