What Best Buy and Macy's are saying about retail

The back-to-school season could be strong, and this year's holiday season could follow suit.

By Jim Cramer Aug 28, 2014 10:34AM

Macy's Store in Kennewick, Wash. © Francis Dean/REXBest Buy (BBY) and Macy's (M) say it all. Both missed. Both guided down. Both were pretty shocking. Macy's because it has been amazingly consistent and Best Buy because, honestly, the commentary could not have been more negative.

Macy's got hammered, and it turned out to be a fabulous buying opportunity. Why? Try as I have, I don't know. Maybe it is just a belief that things are getting better. Maybe because people believe that the lower gasoline goes, the better Macy's does. Perhaps it was an aberration? Maybe they saw how J.C. Penney (JCP) came back but not so much that it made a difference? Maybe it was a recognition that there has been less price cutting in the group? We don't even know. No one has the answer, but I have heard a lot of conjecture.

The simple fact is that there is a huge bid under retail and Macy's is retail.

TheStreet,com logoBest Buy was far worse than Macy's. The commentary was simply awful. When I read it, I said, "They are telling you to sell this stock because they are going to get their heads beaten in by Amazon (AMZN)."

But, as with Macy's, it didn't matter. Now the stock is going higher. You can say, "Well, wait, as with Macy's, we didn't get any real downgrades." Still, though, it's working, and that's what matters.

So what's up with all of this? If you look at the good performers in the group -- TJX (TJX), Ross Stores (ROST) and Urban Outfitters(URBN) -- and you notice that Target (TGT) didn't go down on that horrendous quarter, you have to conclude two things:

  1. The back-to-school season is going much better than you think.
  2. People are betting the holiday season is going to be very strong.

In Best Buy's case, it is betting that the holiday season is going to be better because of gaming, new cellphones and new GoPro (GPRO) devices, all of which are in the Best Buy sweet spot.

Like the other day, when I opined that you didn't have to worry about the bank stocks' rally because they don't report for a long time, you can speculate that holiday season can take these retailers far -- provided that you don't get any real bad back-to-school commentary. I think you have to believe that you would have already if that were the case.

Hence why the move has legs. Hence why you have to buy stocks of companies that didn't report good numbers, betting that the future is brighter. I get it. I wish it weren't like that, but I get it, and I think that's the real reason the SPDR S&P Retail ETF (XRT) seems to have a bid underneath it, no matter what's said or done.

Random Musings

  • The suspicious buying in Kellogg (K) is so persistent, who doesn't want to go long it?
  • The selling in SunTrust (STI) is ridiculous, but it keeps happening.
  • I think the fact that SeaDrill (SDRL) isn't down badly on that terrible number means two things: One, some analysts will still downgrade it tomorrow but, two, because they are not buying more ships, we are putting in a bottom.
  • I hear Doug Kass on social media stocks. They will be doggie as long as there is a threat of monster IPOs ahead.
  • But I also know the earnings-per-share power of Facebook (FB), Google (GOOGL) and even Twitter (TWTR) beckons, and I wouldn't sell Yelp (YELP) no matter what.
  • GoPro and Mobileye (MBLY) are the two new specs that are loved and will stay that way for a long time.

Jim Cramer headshot

Jim Cramer's Action Alerts Plus: Check out this charitable trust portfolio for the stocks Cramer thinks could be winners. The portfolio
is long FB and GOOGL.

More from TheStreet


Aug 28, 2014 11:45AM
Cramer analysis 101:

a) Determine effect - e.g. Stock price went down

b) Review possible causes 

c) Choose one cause and publish as fact

d) Scream loudly and often how great you are

e) Ignore the thousands of awful calls you have made

f) Rake in suckers cash I guess : (

g) Jail time with madoff one day maybe : )

Aug 28, 2014 10:46AM
Is it possible that a company would talk it's own stock down on purpose?  With so many companies buying so many of their own shares back, a scenario like this isn't out of the question.  If a company like Macy's is planning a huge buyback, why wouldn't they talk down their forward guidance and slowly buy the stock back on the dip?  Yes, it's illegal.  But many of the folks on Wall Street are getting away with far worse, so why not?
Aug 28, 2014 3:09PM
Who cares? The story is all the other retailers missing estimates and cutting forecasts.
Aug 28, 2014 10:57AM
The arbitrage of low wage products continues to erode the incomes of resident Americans.  Anyone thinking there is no cost to free trade is very very dumb.  Taking advantage of this difference the way the Multi nationals have, like any disjointed economic policy, will not last forever.  What we are seeing is an economic event where wage differentials are being used to advance massive profits for those who are able to use the policy to bring in low wage products and sell them to Residents of a depleting higher wage market. The American consumer seems very very unaware of the end result which will be lower wages and a lower standard of living to go with them.  They seem like they are just eating chips, watching the flat screen, and remain oblivious to these events happening around them. There is no, none, absolutely no way, never not in a million years profits these multi Nationals are seeing now can continue.  These markets are like ten years behind reality and those investing believing these profits will continue will in time pay a huge price not recognizing these economic imperatives today. 
Aug 28, 2014 12:29PM
What's Cramer gonna do when it's no longer a "Bull" market?
We are in the final collapse of the US economy. The stock market can no longer take the monthly hits that retired people are giving it taking money out to live on. The government is giving away free tax credits to every business out there reducing their revenue stream and more people are making less money than they did last year also reducing revenue streams for both government and the private sector. That with increased spending on keeping the now unemployable millions in our work force and we have government expenses soaring at a time when they hoped to cash out the S.S. T-bills to help pay for S.S. payments to the elderly.

The policy of letting illegal Mexicans migrate into the US work force to shore up the falling US work force as baby boomers retired has totally back fired as it is easier for the illegal Mexicans to get welfare money and free health care than US citizens. Add to the expense burden of our government instead of adding to it's tax coffers as the policy makers had hoped.

The Ebola virus has reach critical mass and is no longer stoppable going to double in victims in 21 days and double again after that -- well you see the end result at least 1/3 of the world population gone by end of next year.

ISIS is going to take over the Arab world and it's oil soon. We have at least 3 aircraft carriers with about 90 planes each and hundreds of planes at military bases around the middle east and yet we only hit ISIS 89 times the first week of air strikes -- We do not want to hit them and the targets we said we hit were probably non targets or already destroyed targets. We want ISIS to defeat all the Shiite Muslims over there they are our only way of defeating them as we can not send troops in to do it.

Expect to hear more of Iraq falling to these guys. Why do you think we staged most of the US military hardware in Northern Iraq real handy for them to grab??? And why do you think we spent years training the Sunni's to use the weapons???

And as far as the now $17 trillion government debt ??? With interest rates going to 5 percent next year to attract buyers for worthless US T-bills the economy is doomed to collapse.

Add in that Europe and Japan have both totally collapsed economies and the BRICS countries growing at close to 10 percent a year and there we have what is happening.

There is one more disaster out there we have the Ebola, ISIS, Western debt crisis all coming to an head and yet there is one more that has not raised it's head yet.

Aug 28, 2014 12:14PM
Macy's success has been based entirely on busy professional people buying brand name quality. Two impediments today- fewer professionals who can afford the higher price tag... lesser quality.
I give Best Buy credit for training floor people two ways, first to know their merchandise and second, to stick to recommending in the realm of their training.
We need quality goods and quality help when shopping for higher ticket items. Both of these traits are not found online (think- Yelp and the importer critiquing it's own imports disguised as buyers). The campus condescending stupidity days are over. At least these two retailers are trying an end run back toward reality before this whole hot mess crashes. 
Aug 28, 2014 11:55AM
Looks like Cramer is working the thumbs down button this am.  Would you put it past him?
Aug 28, 2014 12:02PM
More Cramerisms from the daily Cramer Chronicles. 

Cramer much like VL, Dave, & NTU grab onto some idea real or imagined and fly with it. In their world A always leads to B and eureka some amazing insight. 

Yuk yuk! 
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