Soul searching in retail
Only a few have figured out frugal consumers.
There's an awful lot of soul searching going on in retail right now. It's become one of those moments when management teams are wondering about what happened this quarter, which, for many but not all, was a very tough one.
The Gap, fresh from giving shorts a slam about the head with some terrific monthly October comps, reported overall comps that were a total letdown and signaled that there was, in the word of excellent CEO Glenn Murphy, a lot of "fatigue" among consumers. I didn't think the quarter was all that bad, but the Street, exemplified by BMO, thinks that the momentum has peaked, in part because of disappointing gross margins, and that the lack of upside guidance could spell the end to the streak. I think that's severe, but the nation's largest apparel chain didn't give you much reason to hold on to it after that $37-to-$41 romp.
Ross Stores was a real puzzler. The quarter was worrisome on all fronts, including a marked deterioration throughout the quarter. I think it is safe to say after examining this quarter that Ross Stores is officially the poor man's TJX (TJX), without a lot of new assortment and without a lot of brand names attracting shoppers. This terrific regional-to-national growth story may recover, but you could hear the analyst dismay as Ross lost its most-favored-nation status.
But the most worrisome of the three was The Fresh Market, because this one had real momentum not that long ago and seemed to be a legitimate challenge to Whole Foods (WFM).
Lots of the conference call was devoted to two problematic cluster launches, Sacramento and Houston, that simply were disappointing, causing analysts to question whether this company could handle a nationwide roll-out, so vital to maintaining that elevated 33 price-to-earnings multiple. That one will shrink quickly. It does call into mind, though, the possibility of both saturation and a lack of differentiation not just between Whole Foods and The Fresh Market but between the national supermarkets that are clearly catching up to these specialty organic and natural supermarkets.
Also, it calls into question the expansion plans of the company. Why open three stores in the Sacramento area at the same time? Whole Foods has only one there. What makes The Fresh Market's team even think there's a demand for that many of their stores in that portion of the country? It just seemed like a tactical mistake.
I left this call thinking that this group has become downright dangerous, although it does put into perspective how good Whole Foods is in maintaining 5% comps, which are appreciably better than those of The Fresh Market.
You could argue all three have their issues. But when you ponder that terrible Target (TGT) quarter, in which somehow Canada was blamed for some of the shortfall -- which is always a chuckle -- the downbeat Wal-Mart (WMT) quarter and the abysmal Kohl's (KSS) number, plus the lauded but hardly laudable J.C. Penney (JCP) quarter, you don't come up with a pretty picture for the country or for these mass retailers in general.
This shows Costco (COST), Starbucks (SBUX), Macy's (M), Home Depot (HD) and TJX, all of which had outstanding quarters, as being shrewd operators. But you have to wonder if maybe their model is better. Costco has the club, Starbucks has the pizazz and fabulous execution, TJX has the cheapest branded merchandise, so all three of those are models that work. Macy's and Home Depot seem to be riding a wave of changes made over many years, as well as the power of higher home prices.
The weaker companies cited Washington, but the companies with quarters that shined had to deal with Washington, too. That's why I am calling into question the way these companies do business with newly frugal consumers. Some just aren't up to it and may not be investable until they figure things out.
But the winners? Their stocks are the ones to buy every time they come in. They've figured out the new consumers. They will do well now and thrive when things ultimately do get better in this country.
Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long COST, M and TJX.
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Cramer I like the way you and CEO Glenn Murphy dance around the fact that the middle class is now the poor class and broke.
The Death Spiral of Lost Jobs and an ever weaker and weaker economy is about to crash into the ground.
We have $80,000 a year plus jobs disappear forever and replaced by $10,000 (minimum wage at 29 hours a week) jobs. A hit of $70,000 per lost job that is replaced. And it gets worse as only 1 out of 3 lost jobs got replaced.
Overall the effect was not noticed as wages kept going up on average as CEO's like Murphy kept paying themselves more and more as they laid off more and more people.
Economics is pure fiction as there is nothing in economics that takes an overall view of the economy.
There should be warning warning danger danger signals going up all over the US from economists but the stock market is acting like things are totally recovered in the real world up almost 30 percent this year.
Yet more than half the workers in American now make less than half the income needed to live on. We are seeing food stamps and welfare help dwindle making these people's positions critical. The Federal Reserve is having to buy stocks and bonds to keep the "free market" going up . The Federal Government is never going to pay off any of it's debt and will continue to add to it by about $1 trillion plus each year over the next decades. Ever borrowing money to pay the debt it owes.
The end is coming soon people by Sept 2015.
Stores starting their sales Thanksgiving afternoon - what happened to starting early Friday? Will we see the lines start forming on Thanksgiving morning?
Black Friday ads being released the 1st week in November. Used to be they were released a day ahead of time, then a week. Now this.
Wal-Mart offering guaranteed inventory for many sale items on Black Friday. As long as you are in line, you're guaranteed to get those items at the Black Friday price. Used to be each store had just a couple of each sale item and it was first-come-first-served til they ran out.
A few stores like ToysRUs and others are offering special sales for the weekend BEFORE Thanksgiving - sales a week before Black Friday?
If retailers were doing great, none of this stuff would be necessary. Somehow Black Friday has morphed into "Black November".
Cramer, what's with the retail worries (and articles) lately? it's like watching a branch quiver in the breeze and wondering why. meanwhile, the branch is actually in the back of a pick up truck driving down the road getting a breeze - or not - based on how fast the pickup is driven.
the root cause of any retail quivers, is the continued job market, which is still in it's own quandary.
to know where retail is going, FIRST you need to get a grip on where jobs are going.
1. where are the new jobs?
2. do they pay enough for people to buy "lots" of things or just a few things?
Read yesterday were three investment gurus dumping stock like crazy, specifically retail. Soros, Buffet and Poulson. Buffet a big Obama supporter was knocking the obamacare mandate. Huge premium increase for the younger middle to upper class will take money from the retail side of the economy. That's a hit on 70% of the economy. How much affect this will have we will know in the fullness of time.
I'm sure we will get a post from where ever you are Vaginas..... apparently we are all you live for.
V V on vacation.......... "I can't wait to post on the MSN blog site".. Maybe it's Cramer..... Cramer owns you.
Kind of like the old days. Stores had to fight for customers.
V V:I bet ABS is at least half black.How else does he claim to know so much about inter
cities.I have to read about snap.Wher I live everybody lives the American dream.
It'll take a while longer, but there will eventually be a recognition that the U.S.'s consumer economy came to a crashing close with the financial collapse of 2008.
The new economy is, by comparison, a middle-lower-class economy. With the possible exception of a down-scaling(!) Wal-Mart, the chains listed in this article are relics of that 1946-2008 socioeconomic system. The dollar store is the chain of tomorrow.
Barry, I notice you didn`t deny being at least half black.Is that why you and Charlie Rangel
are suck good butt buddies?
Sweet Geezus, I just went past post 13131, I like that number but I spend way too much goddamn time on here...
That number makes me think of a Full House...Aces over Threes...That makes me think of Casinos.
I spend way too much friggin' time there too....
I didn't lose enough last time....Maybe I can get some back...
Ya'll have a nice weekend...
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