Pillars of strength in retail

Home Depot, Dick's and Best Buy should all be bought on any weakness.

By Jim Cramer Nov 20, 2013 10:36AM

TheStreet.com logoBest Buy store in Plattsburgh, NY © CNY Collection/AlamyThe homework doesn't dovetail with the shares. That's how I felt about the way stocks traded in the wake of the Best Buy (BBY), Home Depot (HD) and Dick's (DKS) earnings calls, because all three were basically in all-systems-go mode for suppliers.

 

Home Depot loves to give you the state of the state, and the company continues to show you why it can have such positive comparable-store numbers -- namely because business is booming from continued house-price inflation. That's how you get your American stores to grow at 8.2 percent, which has come due to a combination of rising traffic as well as increased spending.

 

Why not? When you are buying a home these days, you are doing so because you need it -- but also because you now believe that, over time, it will start to appreciate in value again. We see these big 10 percent jumps in housing prices across the country, with some 20 percent areas thrown in, and we might want to believe that we are in some inflationary spiral. But I think, after listening to the Home Depot call, that we are still in catch-up mode from where we left off.

 

I say that because Home Depot, beyond giving you a depiction of the psyche of the consumer, also tells you something else. The pro business -- which is the business that comes from getting professionals to both build and renovate your house, rather than you doing it yourself -- has continued to grow at a slightly faster pace than the consumer business. That's excellent news for hiring. In fact, it's one of the few bright spots out there, other than in social, mobile and cloud technology, oil and gas and healthcare.

 

What's selling? Pretty much everything. That's also good news, because at times there had been aisles at Home Depot that simply weren't moving as well as others were. You've got positive comps in kitchens, lighting, décor, lumber, electrical and indoor garden. All were above the company's average sales. Millwork, flooring, plumbing, outdoor garden, building materials, hardware and tools were positive but below the company average.

 

My takeaways there: I would have to believe that Fortune Brands Home and Security (FBHS) and Masco (MAS) are doing pretty darned well, although I wouldn't be jumping up and down for Stanley Black & Decker (SWK) off of that. I wonder if Lumber Liquidators (LL) is actually taking share in flooring, given how well their numbers are doing. It's certainly worth pondering.

 

Home Depot's new enhanced-appliance showroom, when coupled with the online presence, yielded double-digit comps growth for appliances. Any check of the website or the store would tell you that Whirlpool (WHR), which was downgraded Tuesday by a prominent brokerage house, is a big winner.

 

In perhaps best and most pointed metric, the new Cree (CREE) TrueWhite bulb was called out as a great seller. That's because, as executive vice president of merchandising Craig Manear points out, the bulb "gives off some of the best natural color when compared to other LED bulbs." Two takeaways there: First, terrific -- maybe my house won't look so two-toned outside. Second, you have to, once again, take a look at Cree shares. Even though the stock is up 59% for the year, it's still way off its highs.

 

For Dick's, the callout is real simple: Apparel and footwear are selling well. Both Nike (NKE) and Under Armour (UA) are mentioned positively. Still, there was an odd interchange in the conference call about how Nike is opening stores that are competitive to Dick's. That was met with a riposte that Dick's is doing some private-label apparel that's selling well, too. I reiterate that Under Armour is the buy here.

 

Finally, as for Best Buy, it looks as if the tablet is the standout. I know that Apple's (AAPL) become a hated equity, but I keep hearing good things, so I can't join the nitpicker mob. You did get a nice Chrome call out for Google (GOOG), but that's just icing on the Google lovers' cake.

 

All three chain stores -- Home Depot, Dick's and Best Buy -- are pictures of strength, not weakness. All three stocks should be bought, not sold, on share weakness, despite whatever the "action" says about how well the companies performed. They have performed superbly against both their fields and against retail in general.

 

At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, was long AAPL.


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133Comments
Nov 20, 2013 12:56PM
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this clown recommended dick's awhile ago and the next day it tanked...BEWARE THE HUCKSTER
Nov 20, 2013 11:24AM
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Buddy of mine lost his job because of ObummerCare yesterday. He was in sales. The company told him that he was now an independent contractor.... no draw, no insurance.
Nov 20, 2013 11:02AM
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Let me offer a bit of reality here from my perspective Jim.  As you travel throughout these seemingly profitable big box retailers look where the stuff they are selling is manufactured.  You see all the new emerging market crap now regarded as retail staples?  In time the arbitrage of lowering American wager will cut into the bottom lines of these interlopers.  These retailers make a significant profit that is and will continue to decline as American wages are now unarguably on the decline.  If Americans were smarter they would realize every dollar they spend on this cheap low wage crap puts pressure to lower their own wages and job worth. And then we have the retailers Jim cites here who have learned to live on a 70 to 80% markup.  Easy money alright but as they say nothing good goes on forever.  I see a groove right now where we will realize another drop in worker wages as seen in the DOD opening the door to lower wages for their employees.  Anyone thinking we are anytime soon going to escape wage deflation is out of it.  The prime goal of this ACA is cost and wage controls.  Doctors and Lawyers and their high salaries are in the crosshairs at this point. And some for sure will revel in the demise of lifestyles of their fellow Americans. The New World Order inflicted on innocent Americans continues unabated and is a lie 100 times larger than all this ACA garbage.  So retail will in time suffer the contractions occuring throughout this lame $2 trillion dollar a year boosted economy.  Of course we shouldn't look at the future deline as that means we are racist, UnAmerican,  or just not all there.   Americans should shop and buy but they should also buy products that are healthy for them and healthy for the rest of us as well. Something about these big box retailers reminds me of the expression "Fly by Night".  as there is little to rejoice in when you see the actual business they are engaged in.   JMHO
Nov 20, 2013 11:37AM
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from the days when i did art shows selling pottery, i learned to look at the crowds and see how many people were carrying shopping bags.  ALONG with crowds in general. 

 

i don't see the crowds at home depot or best buy.  and i don't see people carrying products around within the store. 

 

so i don't know where the numbers Cramer mentions are coming from

Nov 20, 2013 11:07AM
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"The pro business -- which is the business that comes from getting professionals to both build and renovate your house, rather than you doing it yourself -- has continued to grow at a slightly faster pace than the consumer business. That's excellent news for hiring"

 

No - Thats every guy with a pickup truck going into home repair business because they can't find a job making decent money. Home repair, landscaping, firewood.......... etc. etc.

Nov 20, 2013 1:47PM
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ABS, LOM......Fatty Cakes..(like Brent) and a few others has had several, maybe 5-6 Alias...

He sprung a new one the other night, Walkinshaw or something...But tagged it with FatCat..

He nothing but fat, little gookie, living in a box out on the 101...


Ms. Bambi lives under the same bridge on the other side or end.....


And Mister Brucey, jumps boxcars with him and shares the same Library card...

Sometimes he goes over late at night, but we don't know why...

From our spacious Mansion, we can see Fatty's Box down the highway, with binoculars.

Nov 20, 2013 5:31PM
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Buy the dips,,,,,,,,,,,I LOVE ONION DIP 
Nov 20, 2013 2:13PM
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I recommend we all file a complaint with the Commentators about "Senor Akimoto". If you scroll through the history, it appears the "Cat" hijacked the ID about a week ago. Akimoto religiously did condescending Obama put-downs. About a week ago the posts shifted to lame, crude, guttural loser stuff... trademark psychopath Cat.  Cat... you need REAL help. You have a legitimate illness.
Nov 20, 2013 12:09PM
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Home Depot, Lowes, Menards and others are only based on what is perceived or their numbers...

They had a pretty good come back, when housing started to recover some; And many "baby boomers" along with other retirees felt comfortable enough to spend some money remodeling and refurbishing their abodes.

Along with that more and more Contractors have turned to these stores, for product as opposed to local Lumber Companies ie; Pricing, Discounts, Credit and selections...

Therefore, like competition against a Wal-Mart, the old lumber places can't compete; They are going away..

These business are cyclical in nature, and NOT recession proof, but fairly well run Companies.

And like many stocks are quite pricey lately...

We owned Home Depot and Lowes both until about 8-12 months ago.....Now out of positions.

Menards is privately owned.

Before considering any positions...I would do a lot of research and maybe wait for a 5-10% dip. 

Nov 20, 2013 12:37PM
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a year ago, how many PROFESSIONALS were saying Best Buy wouldn't be around come Xmas this year!  I also gotta wonder when analysts raise their price target which is still below the stock's 52 week high.  
Nov 20, 2013 1:39PM
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There is no point complaining about retailers.  They are direct reflections of the collective individual decisions of everyone.   If they don't sufficiently appeal to enough people, goodbye. --- Like Sears, K-mart, JCP, Montgomery-Ward, etc, etc.

Something we all need to remember -- the store called the Federal Government exists at the leisure of the states. --- FACT ---- 

A boycott is needed soon.

Nov 20, 2013 1:11PM
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FOX, the perfect place for Maria ... once heard her say on TV that recessions were good for the economy.
Nov 20, 2013 5:30PM
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Fatty Cakes....Mr. Fat Cat, Fat Cat, Senor Akimoto, Jose Bueno, Emwolb, and a couple others not used often...Eric  Walkinshaw, maybe it was Rickshaw the other day..

Har, har, har.


Crazy 8s....Is not Fat Cat....yuk, yuk, yuk..


The Markets and Equities were crap today, no explanation needed....arf, arf, arf..

And DLH is right about Bobo...

And ABS's signature is Cretin, amongst other sometimes racial titles.

But my racism is good....All other's baaadd.


Nov 20, 2013 5:06PM
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Actually Veritas OBAMA RODEO CLOWNS ARE QUITE POPULAR IN THE INSANE ASYLUMS AND WALMART STORES

If we closed all the WALMART stores where would the DEMOCRATS SHOP ????
Nov 20, 2013 2:04PM
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old joke from years ago.  two retailers discussing their mark ups.  5% was actually 5 TIMES their purchase cost.  so 70% would actually be 7 times their purchase cost. 

 

when i worked at a lighting company, several products that we sold to home depot at $6, $7, $8 each were retailed at $60, $70, and $80 each, so just "10%"

Nov 20, 2013 3:05PM
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Market manipulators must feel so stupid ... their behavior is dumbfounding ... good economic news every where ... Yellin has said she most likely won't tailor until 2015 ... and traders sell on a week's old news ... stupid, stupid. stupid.

Nov 20, 2013 12:57PM
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for all those who think voting matters please look at what voting has gotten us
Nov 20, 2013 12:52PM
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As I work for an insurance restoration company (we do private renovations as well) I can tell you that this year was slower then last, and our Home Depot/Lowes purchases are down as is the store traffic.  I think a  lot of people are in "wait and see" mode right now delaying purchases.  Also I've noticed a lot of customers are "cashing out" electing to take the insurance money and do repairs themselves instead of us. 
Nov 20, 2013 5:19PM
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If it had been Vaginas instead of Brent having surgery I'm sure we would have been getting post from the operating room..........  "I can feel the knife opening me up but I can still aggravate the t baggers" ........... LMAO
Nov 20, 2013 3:36PM
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They should edit in sacks with holes for the eyes on the poor people that are pictured on the ACA website......... out of courtesy.
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