Cramer's Stop Trading! The Fall of Wal-Mart?(11/3/09)

Stocks discussed on Jim Cramer's Stop Trading! TV Segment, Tuesday November 3.

Coach (COH), Williams-Sonoma (WSM), Tiffany (TIF), Nordstrom (JWN), Ralph Lauren (RL), Wal-Mart (WMT), Stanley Works (SWK), Black and Decker (BDK), Newel Rubbermaid (NWL), American Tower (AMT), AT&T (T), Verizon (VZ)

The consumer is alive and kicking; sales at Coach (COH), Williams-Sonoma (WSM), Tiffany (TIF) and Nordstrom (JWN) are up; Ralph Lauren (RL) should add to the trend and "report a great number" according to Cramer. Retailers have been keeping a cautious eye on inventory to avoid losing money on having to discount items for sales. Cramer thinks that, contrary to bears' predictions, the holiday season should be good for retail.

Suppliers may be the David to the Wal-Mart Goliath, and consolidation is giving suppliers more price-control. Stanley Works' (SWK) acquisition of Black and Decker (BDK) is one example; Cramer thinks Newel Rubbermaid is a good play on the merger because of its tool division. “We are seeing a colossal fight between Wal-Mart and the suppliers,” Cramer said, “and right now with these mergers the suppliers are winning.”

One war Cramer would avoid is the price war between AT&T (T) and Verizon (VZ); he recommends buying American Tower (AMT) instead as a trade on smartphones.

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Comments

[blueblazer:]

Crammer loves A T&T, now he says stay away. NOW he tells me. UGG

Nov 04 10:14 AM

[Dotcom:]

T is at a great entry point, has a good yield, is one of the top 2 telecoms... It is at it's 200 day MA. Hmmm - what to do?

Nov 04 12:31 PM

[BigOlDave:]

For many years I worked for a paper company that ran tons of boxes for companies like P&G. P&G sourced through several of our competitors, whip-sawing us to the point where the business had no profit margins. Later many of these paper companies got out of the business entirely, or would not bid on business for cut-throat outfits like P&G.

Wal-Mart is similarly "cut-throat", dealing only with suppliers who sell to them at a price where Wal-Mart (1) makes an acceptable (usually low) profit margin; AND (2) can offer the supplier's product at a price at or below competitors' stores'. Wal-Mart buyers are savvy negotiators who will always leverage volume (good for suppliers -- covers fixed costs and allows economies of scale) and price (good for Wal-Mart customers and, ultimately, shareholders). Suppliers are forced to tighten up their operations to stay in business.

Suppliers that opt to fight with Wal-Mart will get to see Wal-Mart's back: Wal-Mart will walk away. If Stanley Black & Decker thinks they can now squeeze higher prices out of Wal-Mart (or Lowes or Home Depot, for that matter), they will end up with a lot of power tools in their finished goods inventory. If I ever replace my Craftsman drill, I could care less who makes it, as long as it's good value (value = quality + price).

Many Americans still don't accept that all markets are now global. If we can't compete, we die.

In the meantime, Wal-Mart looks like the best, one-stop place in town for good stuff at a bargain price. It lets me maintain a standard of living my income would otherwise no longer permit.

Nov 04 05:07 PM

[action:]

How about sucking the blood of underage children working for Wal-mart in Asia... I will never ever walk into this new international vampire...I prefer to have lower standard of living than being part of this slavery.... But if you do good luck for sleeping at night and not having any of these kid coming to your dream .......

Nov 05 12:28 AM

[User 185953:]

Well said - right down the road from me, but I never go there.

Nov 08 04:37 PM