Retail numbers paint positive picture
Listening to this week's conference calls from major retailers, it's hard to stay negative.
If you want to be negative, do not, I repeat, do not read the conference calls from this week's prominent retailers -- Lowe's (LOW), Home Depot (HD), Wal-Mart (WMT), Nordstrom (JWN), Saks (SKS) and Urban Outfitters (URBN).
Don't read them, because you will not be able to stay as negative as you are. You will have to lump in some dollops of Allied Irish (AIB) bonds, miserable cotton costs, some horrid congressional wrangling and a couple of Ben Bernanke-bashing editorials in order to stay as negative and pessimistic as you might be.
Given that two-thirds of this economy is based on service and spending, that's a lot of positives to offset the negatives of higher copper prices -- or is it lower copper we are worried about now, I forget -- and Chinese source-switching.
Forget the headlines, some of which read positively and some of which read like misses; none were misses, believe me. What matters is that every single one of these companies executed better than we thought. Almost all have tight inventories -- too-tight inventories going into the holiday season. Everyone is feeling pretty good about the stability out there.
In short, these are amazing companies reporting pretty terrific quarters, and while I would love to be able to say that's because each is run by geniuses -- that's hardly the case, although these guys are smarter than your average bear -- a lot of the success is simply because things stopped getting worse. We are bumping along the bottom, and these companies are getting stronger and better as that happens.
Believe me, this is amazing. When you consider that, as Carol Tome, the incredible chief financial officer of Home Depot, said on the company's call, "The savings rates now are over 4%. Historically the savings rates in the country were around 2%, so consumers have definitely deleveraged," these earnings are nothing short of spectacular.
Every single one of these retailers has seen a dramatic decline in the use of credit cards, courtesy of both the environment and the difficult consumer "education" and card charge changes out of Washington.
I was particularly blown away by the results of Home Depot this week and Costco (COST) recently when you consider that the "private fixed residential investment as a percentage of GDP," what Home Depot thinks is the best way to measure its business, is at a 60-year low, coming in at 2.2%. Lowe's, which is not as bad as it has been, did fine on this score, too.
Think about it: Double the savings rate, cut the spending on homes to a 60-year low yet still deliver positive comps in almost every region? Dazzling. Dazzling.
Robust home-related store purchases are difficult to imagine, given the negative drumbeat of how much value homes are losing, even as all national data except Zillow's show home prices have been bumping along the bottom for a year now.
But apparel is terrific, too. Take Urban Outfitters. It was supposed to have the wrong fashion, the wrong levels of inventories, the wrong country sourcing and the wrong fabric mixture (cotton). What did it end up with? Excellent fashion sales, particularly in the end of the quarter; lean inventories; better country sourcing than most because it saw the Chinese wage increases coming; and very little upward pressure from cotton prices. No wonder the stock, which was heavily shorted, rallied more than 10%.
You can contrast high and low and find positives. Saks, which is not a terrific operator, posted terrific earnings in part because it is busy slaughtering sacred-cow stores that aren't doing that well, such as the Southampton, N.Y., store. It wasn't, like many others in the chain, economical. Saks is also getting labor costs, a constant problem, under control.
Plus, the positive stock market played a role as it seems to have done with Nordstrom, which delivered an exceptional quarter. Same-store sales vaulted 5.8%. Lump in all channels (catalog, online), and you get 7.3%, with expensive items like jewelry, dresses and shoes doing terrifically. Going into the holidays, Nordstrom is talking as if it has the best inventory positioning in a long time. Boy, I wish the media were on that call. It would kill a ton of negative stories.
Wal-Mart is the toughest call. It's still not doing well. But the market liked it anyway because Wal-Mart is in the "not as bad as it used to be" mode, and that's enough for a stock that has done nothing for years.
What picture does all of this good news paint? One that says things are getting better in this country, mostly because of a better stock market and stabilization of the economy despite Washington. Perhaps that's the real reason long rates are going higher. Things are getting better.
Plus we have Ben Bernanke's safety net, one that can be removed gradually if we get a tax bill, a continuation of unemployment benefits and some better labor numbers.
So add it all together -- and I am not even talking about robust auto sales -- and you struggle to be negative. But negative we must be, right? Because isn't that what are elders are saying? Isn't that what our reporters, who I doubt were on these conference calls, say? Don't the anecdotal negatives of early TV discounts counter all of this good news? Doesn't this news seem disconnected to the allegedly weak sales of Apple (AAPL) iPads, sales that I know are terrific from my own sources?
Anyway, you were warned. I told you the work led to positive conclusions. Believe me, I wish it were the other way around. Then I could be consensus. But the darned work says otherwise. Oops, I am doing it again. I am letting the positive homework get in the way of the negative story.
Sorry to let so many down with all of that good news.
At the time of publication, Cramer was long Apple.
Follow Cramer's trades for his Charitable Trust.
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