Retail faces a defining week

When Home Depot and Lowe's report, we'll have a better idea of how the sector is doing.

By Jim Cramer Aug 16, 2013 9:34AM

thestreetThe biggest debate in retail will be solved next week. Right now, there's a definitive split out there.

 

The stock intelligentsia believes the public is still spending -- but only on the house, not the body. In other words, apparel is weak, much weaker, but home goods are strong. This debate will get settled next week when Home Depot (HD) and Lowe's (LOW) report.

I am truly worried about retail. Our country seems, overnight, to have become a nation of savers. The borrowings are way down, and the money is not being spent at the mall. People seem to be hunkering down at precisely the moment they shouldn't be, when jobs are coming back.

 

Woman swiping a credit card © Rubberball, Mike Kemp, Rubberball, Getty ImagesThere are two explanations. One is that Congress wrecked things with taxes and the sequester and people are feeling it, especially when the tax of higher gasoline prices is upon us. Another is that consumers are still spending but they are spending on their homes now that homes are going up in value. Anyone who has been on a Home Depot call knows that home spending has been below average for years and years. Maybe that's changing.


But if it isn't, look out below. That's why the risk-reward on retail is so daunting. If Home Depot and Lowe's say good things on their earnings calls, then we know consumers are spending, but not spending at traditional mall-based stores, so there may be no reason for traditional retailers to rally. But if consumers aren't spending on the home and that has cooled too, I have no doubt that all of retail will take a hit down to levels where the stocks represent better bargains than they do now.

 

Home Depot, at 20 times earnings, could easily trade down to $70 a share if it doesn't have a pretty darned good quarter. So could Wal-Mart (WMT) if that happens.

This group, to me, is in trouble. It has ridden the refinance and housing boom for ages. Those are over. These stocks will not be bailed out by an improving Europe or Asia. They will only be hurt by Congress when the summer is over.

 

Puts, anyone?

 

cramer

 

 

Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and had no psotiions in stocks mentioned.

 

 

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176Comments
Aug 16, 2013 10:22AM
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Cramer - you think we've just become of nation of savers?

Maybe if you look more closely you will see that household income is down and people can't afford to buy crap anymore.

We're spending on groceries, keeping the lights on, and putting gas in the car....there's not much left after that.

Aug 16, 2013 10:29AM
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Only in a house-of-cards, consumer-debt-driven, inflation-based economy like ours, is more savings a bad thing.  Oh how the mighty have fallen.

And no one should be surprised by the crappy revenues, earnings and forecasts coming out of retailers.  We've had 3 quarters now of sub 2% GDP growth.  We're just not seeing enough job creation and most of the jobs that are being created pay crappy wages.  Then we have Obamacare - no one still seems to know how or when it might be implemented, but it's still hanging over our heads like an ominous cloud.  Add in rising interest rates and you've got a good recipe for poor retail performance.

Aug 16, 2013 10:04AM
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"There are two explanations. One is that Washington wrecked things ....... Another is that consumers are still spending, but they......"

 

no.  like after the grocery store stike we had in california years back, people learned how to shop differently. 

 

people have rediscovered thrift stores and yard sales and craft shows.  people have realized they have a closet full of stuff they can sell or trade with others.  or just pass on to that local thrift store and go there later to buy new stuff for cheap. 

Aug 16, 2013 11:13AM
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So let me guess -- IT'S ALL BUSH'S FAULT ??
Aug 16, 2013 10:23AM
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Steve
As VL has correctly said many times:
The underground economy is flourishing.
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Houses break down (as cheap as they are made this is more often than not) and thus people have to spend money on their houses. Clothes well last year's fashion is still this year's fashion and will be next year again.

 

Cramer just face reality main street is gone and the Fed Reserve is merely printing trillions of dollars a year just to service bad debt that is not being paid back -- mostly government bonds -- US,Europe and Japan.

 

By 2015 Sept 15 the whole western economy is going to come to a terrible collapse

 

Everyone knows this and the BRICS are switching to the Chinese yuan as fast as possible.

 

That is why China even though it's economy is growing at a twenty percent rate right now it is invisible as more and more trades are done in yuan and not dollars and people only track the dollars.

 

Expect the worst to happen and sooner rather than later folks.

Aug 16, 2013 1:53PM
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I had a Mc'TOG Special....English muff, fresh tomatoes from garden, pork off the farm, egg from the kid's chickens and cheese we got from the food bank...All toasted up with butter and mayo..

 

God is life good, and sometimes cheap.

Time to hit those bridges....Ciao.

Aug 16, 2013 12:42PM
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He did it AGAIN !!!
Chenay For President = Sargant Frank- Regalman
I wonder if Acorn put him the corporate office so he can use 4 computers at once (one for each ID) ?


Aug 16, 2013 12:44PM
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Don't worry Liberals when things are looking bad you can always call on Little Beaver to save the day.
Aug 16, 2013 10:30AM
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Cramer - tell me about jobs coming back when we have fat-cat a*-hole-CEOs like John Chambers at Cisco who thinks it's not enough to beat company estimates - no, he thinks they need to lay off 4,000 more people to keep his numbers in the black at the expense of losing talent and intellectual property.

because to short-sighted jerks like him, NUMBERS are all that matters....he will let innovation fall by the wayside as he counts his pennies. May all of their competitors gain from his stupid thinking.

I hope he is haunted in his dreams for the rest of his greedy life. Poor thing is only making 11 million dollars a year.

Aug 16, 2013 11:45AM
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"People seem to be hunkering down at precisely the moment they shouldn't be, when jobs are coming back."  Mr. Cramer you are a stone cold moron.
Aug 16, 2013 1:45PM
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Since about 2007 or maybe a little longer? Americans have been saving more and have fallen in-line with peers or other saving Nations...

With the downturn in that year and worst in 2008; Americans have become very tight with their monies.

 

Baby boomers and others loss much of their investing dollars, many went to cash and low yielding instruments, others may have even bought gold or silver?? Those commodity prices had some pretty good runs in those time frames..

Out of fear and survival techniques, we have been very slow to maintain a full Recovery from our deepest Recession.

 

No doubt older Generations, have hunkered down and younger generations, have not found the need to purchase permanent homes or many durable goods..

Having read some studies, many younger people are also not buying cars..

I'm assuming a larger percentage, have moved back home and living cheaper by any means necessary.

 

Plus others, young and old alike have turned to leasing, renting, etc..

With realizations of not collecting a lot of stuff like generations before them..

Plus the job factors entering into the picture of the need or wants of being a "Mobile Society."

The young for jobs....The old for more comfortable retirement surroundings such as winter or summer condos or leasing temporarily.

Aug 16, 2013 12:21PM
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Cramer is like a flag, he's out there wagging his mouth whichever way the wind if blowing that day.  The Market is up, good ol' Jim is going to tell you everything is rosy and to invest all your money.  The next day the markets down and he is going to tell you the sky is falling and ways to protect your money. 
Aug 16, 2013 2:13PM
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 I asked One of my Grand Children what She would like to be when She is grown up???

She responded """'I would like to go into ORGANIZED CRIME""

I asked GOVERNMENT OR PRIVATE ????
Aug 16, 2013 12:38PM
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What's it feel like veritas to get taken by the clown boy cramer? What the he11 was you thinking boy.
Aug 16, 2013 1:36PM
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Think I'll take an early lunch today. Stretch it a little longer than usual.
What shall I eat ?
Italian?
Chinks?
Greek?

MOM - I'm coming up from the basement , make me a P& J.
Now, you're neutered Vaginas



Aug 16, 2013 10:36AM
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Floating
Two companies (that I know of) are considering taking themselves private, Blackberry and Dole. Could this be the wave of the future, a way to keep short sited shareholders (many times hedge funds who only end up renting the stocks for a few months) from dictating how the company should be run?
Aug 16, 2013 3:57PM
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Very slow lefty douche bag turnout today.
Missing 4 the Love of Others Money -  Burger King shift on Friday
Regalman and new persona's - having sex with new flame "Jill" (His left hand)
Mrs Fat Pussy - MIA (the noodles are in need of stirring)
Vaginas Insheet - She just left for another exotic weekend
yes a very slow day

Aug 16, 2013 3:33PM
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Why don't you let Laughing Cramer hold the door open for you loser.
Aug 16, 2013 3:28PM
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VERITAS


 I LOVE SPOTTED OWL<<<<IT TASTES JUST LIKE CHICKEN

OR MY OBAMA /CHE SHIRT
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