Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday June 5.
Kate Spade (NYSE:KATE) vs. Michael Kors (NYSE:KORS). Other stocks discussed: Iconix (NASDAQ:ICON), J.C. Penney (NYSE:JCP)
Retail has been hit-or-miss recently. Two of the hottest stocks are Kate Spade (KATE) and Michael Kors (KORS). These two stocks have a lot in common. KORS has been going higher since it became public and is a popular high-end brand. It is taking share and is growing overseas. KATE has had a more troubled path, and has changed its name several times. When it was still Liz Claiborne, the company seemed hopeless, but it has seen a turnaround and has spun off non-performing brands.
KORS gets 48% of its sales from retail, with stores in the U.S. and abroad. It gets an almost equal amount from wholesale. KATE has a higher percentage of retail than wholesale, which means higher margins, and generates most of its current sales from the U.S. KORS posted a 26% gain in overall same store sales, but this is a deceleration from the rate for a few years. KATE saw a 43% gain in same store sales. KORS is opening stores aggressively domestically and abroad. KATE has a massive expansion opportunity, and has higher gross margins. KATE has been putting up stronger numbers than KORS, has more room to grow and has risen higher in the past year. However, KORS is cheaper, with a multiple of 19 and 23% growth rate. KATE's multiple is 53, which means if the stock stumbles at all, the stock may get "obliterated." For those who crave risk, KATE might be a buy, but for a more conservative stock, KORS is the choice.
Cramer took some calls:
Iconix (ICON): "I like the story very much. I would stay long. I think the shorts will not make money in this name," said Cramer.
J.C. Penney (JCP) is issuing a lot of stock, and many are unhappy about this, but "I believe in the turn." It is not likely to roar, but it is going higher.
Be Your Own Guru: Sprint (NYSE:S), T-Mobile (NYSE:TMUS), Joy Global (NYSE:JOY), Rite Aid (NYSE:RAD). Other stocks discussed: Palo Alto Networks (NYSE:PANW), FireEye (NASDAQ:FEYE), Infoblox (NYSE:BLOX)
"Be your own guru," said Cramer, "if you figure things out, you will never be whipsawed, and you might catch a move like the one today." The Dow moved up 99 points on Thursday. It wasn't the news that Mario Draghi, ECB Chairman, is going to provide a solution to European deflation or chatter of a merger between Sprint (S) and T-Mobile (TMUS) that moved the market. Earnings from Joy Global (JOY) were strong, but revenues were light. What happened Thursday morning to push stocks up?
David Tepper, high-profile hedge fund manager, said that his concerns about the market had been alleviated. The averages are up since Tepper made his bearish remarks over a month ago. There is no reason to doubt Tepper; his earlier negative views recommended caution but not sitting on the sidelines. One of his concerns was inactivity on the part of the ECB, and once this changed, Tepper became more positive. Cramer thinks Tepper is "the best there is," but he didn't think investors needed to take drastic action based on his previous remarks. Investors need to develop their own opinions rather than panic-selling on cautious comments from gurus. Cramer urged viewers to concentrate on stocks rather than on commentary.
Rite Aid (RAD) reported a shortfall, and Cramer thinks this was a one-time hit to earnings. May same-store sales were strong, and Cramer thinks its turn is still on track; "This may be the best buying opportunity in RAD that you are going to get." Viewers who knew to look at the same-store sales numbers rather than on a temporary hiccup would have bought the stock at the right time. "Know yourself. Know your stocks and why you like them."
Cramer took some calls:
Joy Global: 21% of the shares of Joy Global are sold short, and Cramer thinks JOY has enough good news that the shorts should cover.
Infoblox (BLOX): If this stock goes up at all, sell. "It is one of the worst stocks of 2014."
CEO Interview: Nigel Travis, Dunkin' Brands (NASDAQ:DNKN)
Dunkin' Brands (DNKN) is down 4.9% year to date. The company has a 100% franchise business, which insulates it from commodity costs, and is a regional to national story. Last year, the company grew its store count by 5%. Its yield is 2%. DNKN missed earnings, but weather was a large factor in the decline. CEO Nigel Travis expects a large number of stores to open on the West Coast by the end of the year. The strength of the brand is creating loyalty and increased demand. DNKN is improving efficiency in its sandwich station and is encouraging the use of the drive thru to pick up speed of service. "Technology is the answer," said Travis, who discussed the company's success with apps and social media. The franchisees have been in control of costs, even as coffee prices are rising, and Travis said there may be modest price increases, but competitors are raising prices too. "I'm sticking with DNKN," said Cramer.
Get Cramer's Picks by email - it's free and takes only a few seconds to sign up.