What to make of retail?
Consumers are such a mixed bag that the Fed may have to put off tapering.
If you were at all concerned about the consumer last week, Tuesday night you should have left your office scratching your head. I have now read every single retail conference call since the start of the retail portion of earnings season. With all that information, there's really nothing -- no rhyme or reason to it -- other than to say that consumers sure like their homes, and sure don't care about clothes, unless it is accessories or handbags. Even in handbags, though, they have to be of the highest quality.
How else can you explain these dichotomies? First, Coach (COH) was hideous, while Michael Kors (KORS) was great. Now, Coach has a lower price point and tries to portray itself as a China play. It turns out that you've got a double-edged sword here, though -- because the "sure-America-is-weak but-soon-China-will-be-important" trade doesn't look so good when the U.S. is real weak and the Chinese aren't paying up for Coach bags.Meanwhile, even the cheapest of the Kors bags are selling well, both wholesale and in the company's own stores. Kors is a 40% grower, and that's going up against really difficult comparisons. It beat the numbers by a staggering 23%. Fossil (FOSL), too -- which I regard as an expensive-accessories name, meaning it charges you a heck of a lot for its goods -- reported a terrific quarter. That stock has been on a tear.
But then we come up against Ralph Lauren (RL), and that shortfall is totally mystifying. Really, I mean it. That one can't be explained vs. Kors unless Lauren has really lost its edge, and I haven't heard that from anywhere. Then we have that abomination from Nordstrom (JWN), just when it should have delivered a surprising quarter. Yet, Estee Lauder (EL), a quintessential Nordstrom item, had a terrific quarter.
What the heck are we supposed to conclude?
When you go over the Macy's (M) call and the less descriptive Wal-Mart (WMT) information, you just have a depiction of the consumer in a steep slide -- although Macy's did say its back-to-school season was going well. Macy's commented on women's apparel being weak, and it didn't say negative things about housewares. Wal-Mart, though, pretty much said everything was weak.
But then, on Wednesday, we heard from Home Depot (HD). This company has given us a category-by-category analysis, and standing out as winners are appliances -- big-ticket appliances, items you wouldn't get at either Macy's or Wal-Mart. Best Buy (BBY), though, has a similar product portfolio, so hard goods were being bought aggressively by consumers. TJX (TJX) had terrific numbers, but let's be clear: I thought the call-out was for its HomeGoods subsidiary. The home-goods section of Anthropologie, the high-end portion of the Urban Outfitters (URBN) chain, was also very strong. Urban's strongest unit, however, was teen apparel from Free People. It's a mixed bag but, again, strong in the home.
So let's put it all together. It seems that the wealthy consumer is being picky and extremely fashion-conscious. The middle class and working class aren't spending on themselves as much as on their homes.
That means, to me, that the consumer overall is a mixed bag. But for the purposes of the Federal Reserve, Macy's and Wal-Mart matter more than Home Depot -- and the rest, frankly, is just one big push.
Now, one thing is for certain. When lots of big money is investing in the Merrill Lynch Retail HOLDRS ETF (RTH), you simply must do the opposite. This is the single most disparate, least coherent moment I have seen in owning and trading retail stocks in all my history. The RTH is by far the worst way to play what we see. Most important, if someone from the Fed were to listen to these earnings calls, they would have to say, "It is way too inconclusive to start tapering stimulus in September, even though it looks pretty clear that we have lost the bond market already." Maybe that's what we need to know as we get an onslaught of Fed data -- some of which, I am sure, will be in direct conflict with this boots-on-the-ground information.
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 positions in the stocks mentioned.
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"""It seems that the wealthy consumer is being picky and extremely fashion-conscious. The middle class and working class aren't spending on themselves as much as on their homes."""
MY GOD! JUST WHAT ARE THE POOR PEOPLE UP TO?!?!?!?
Right NTU...The price of food is where "rebellions" really take hold...
Next on the list, is probably religious beliefs; That start the most Wars.
We used to be the "biggest bread basket" in the World per capita...
Now we "export tons" and "import tons"..
Now it's all about "Margins" and of course profits, like always.
I personally think everything to do with food is subsidized "too much", including food stamps.
"Plant Post to Post", "Fence row to fence row", And "let the Chips fall where they may."
Quit "subbing" Big Corporate Farms to squeeze out the little guys.
Then we have the "seamy side" of retail....Prices consistently going and/up or quality going down..
More "cheaply imported" goods.
Sizing's that are "general" such as small, medium and large. Nothing specific and nothing that fits.
Poor quality cloth, made from cheaper materials and "poor/less thread count."
Clothes that wear out with 10-20 washings, or a year/two wear.
Shoes and socks along with underwear all following the same paths.
This highly effects the poor and middle class more so then the rich...
The Middle gets by, the Upper have more money to spend on higher quality and last longer.
More and more people with lower incomes or no jobs are getting fed-up...With higher prices and lower quality goods...Turning to "thrift shops and garage sales."
Where sometimes "quality is better" donated by people that have spent more money.
Or want or need to get new wardrobes....For various reasons.
True Steve....Read a few articles several weeks ago, about "younger generations" not buying Cars and other Durable goods, I guess there are various reasons(that I won't go into).
But I think part might be people under 30 or so, are moving back home more than usual, even when they may be married and/or have families; Plus divorce is a more common theme also.
Many that live in Metro areas, probably have little need for vehicles..
And many have moved quite close their jobs or employment..
My generation or boomers, may have been the last to move way out, and commute dozens of miles to work...Gas and insurance along with cars were much cheaper then.
Retail isn't all that hard to understand, first off it has cycles...IMO
The latest one is the Summer "doldrums" ...
The next is back to school buying...All adds to the bottom line and will be reflected in a few weeks.
Then new fashion hitting the shelves for a Fall line-up bump..
And then the Biggy, Christmas and Holiday splurging..
Then we start all over with Spring fashion line-up.
Some of this is fairly simple, but then there are other problems.
True again Steve,....Many Japanese, I believe still live like that, it's an allotted space issue.
Along with having "cubby holes" there are common areas shared by maybe 3 generations?
Was in Japan about 4 times in the 60s, twice a longer stay.
At a family home for three days or nights,(a couple times) exactly the premise you described, doubt that some of it has changed all that much.
Also true in many other Countries, such as Mexico, South America, Africa and many Asian locations.
Generational living along with some cases of several families under one roof...
Where do you think we got "condo" from.
Nothing like making good picks, although all will probably not matter by 3rd. week of September.
An old position sold out, and looking to "add back" a few weeks ago goes up 5-6% this a.m.(LOW)
Then a decision to pick up a hi-yielder on a downturn and DCA on the ex-div date goes completely South. Even the "follow-on" offering is priced almost $2 above today's price...(NTI).
I'm just going to get the gdamn Dartboard out, screw all the research.
Golds turns and corrects.
REITs running for window ledges, because of the FED.
Ahhh, the biggest boost to Home Improvement, another opinion.
"BOOMERS" and along with that, some fixing up newly bought foreclosures.
Funny thing about people when they retire...They have a tendency to remodel; Change (older gone) children's rooms around...
Update appliances, furnaces, A/C, plumbing, electric, etc...So not to have problems when getting older...
New windows, roofs, siding and making house more efficient...Utility wise.
We did....Our parents did too....More comfort.
If they have the money they do it...Plus keeps them busy and active also.
Guess they started a while back of squeezing down useable space. 200-250' apartments?
A few years ago builders or designers were offering 300-350sq' houses delivered to your site.
A single person or well adapted couple really don't need all that much room..
I could survive with a large farm style kitchen and a bedroom...All in about 350 sq'.
Wife will have no part of it..
Plus we have way too much stuff and junk anyway...Our 3600 ft. barn is full of crap and so are other outbuildings..
Ahhh, Demand goods and consumables,(sp); Things we eat or use up.
Food rising constantly on the whims of retailers, middlemen, and manufactures; With the cost of energy or production playing a big part (all passed downstream).
No one is going to eat those energy cost, except the end user; The Consumer.
If prices don't increase, amounts or net weight decreases, boxes or packaging stay roughly the same size....Many consumers except this because they don't read labeling.
In many cases the quality of fresh has went down, people except bruised fruits or vegetables that have been picked by machine harvest...Or such things that are not ripe, because of needs of shipping or transportation...Storage.
The worst in my opinion are the Quality of Meats we now purchase.
The downgrading of Quality and Standards has changed roughly twice in our lifetime.
The majority of meat products are force-fed, medicated and have poor inspection records.
We are eating products that continually make us sick, or cause us problems in different outbreaks of mostly food-borne illnesses.
Because of demand, most consumers have problem going back to basics...A time factor, always.
Quick, easy, deal with the consequences later.
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