Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday November 29.
With the economy coming back, and Thanksgiving weekend spending up 6% from last year, the American consumer is finally getting back to what he and she does best; "spending money." The department stores represent the "anchors" of any shopping mall and are not vulnerable to the trends of specialty retailers. Of Macy's (M), Nordstrom (JWN), J.C. Penney (JCP), Saks (SKS), Cramer thinks Macy's is best of breed and Nordstrom is runner up. What makes Macy's the best department store?
First, Macy's reported a winning quarter with sales up significantly and improved margins. Saks' performance was decent, but not too exciting. JC Penney had a "low quality beat" that was due to a low tax rate rather than increased sales. While Nordstrom had terrific same store sales, Macy's has a "stronger and longer track record of improvement."
Of all of the above-mentioned department stores, Macy's was the best at keeping its inventory low. It is important not to have excess inventory going into the holiday season to prevent losses caused by huge markdowns and fire sales to get rid of merchandise. Macy's inventories were up only 1.9% year over year compared to a 4.4% increase in sales.
Macy's is a merchandising master that gears its products to suit local tastes. While Nordstrom has great customer service, no one succeeds in localization like Macy's. The stock is up 55% since Cramer recommended it a year ago, and yet it trades at 11.6 times earnings compared to its 9% growth rate. Nordstrom's multiple is 14.4 but has a larger growth rate.
CEO Interview, John Sherman Inergy (NRGY)
Inergy (NRGY), the fourth largest propane play with a natural gas storage business that Cramer "adores" reported a disappointing quarter on Monday. The stock dropped significantly, but recovered to close down just 22 cents. Cramer wanted to know if the company's generous dividend was still safe. CEO John Sherman reassured Cramer that "the first thing we make sure of is that we are protecting our dividend of 7.2%, and we want to combine cash flow and growth." Sherman explained that this was an off-season quarter that only reflected 10% of the company's annual earnings, and there were non-recurring issues with propane demand and a regulatory delay in impending acquisitions.
While John Sherman said the supposed threat natural gas might pose to the propane business is a "non-issue," he was very positive about the natural gas storage business. The company strategically locates its operation between areas with natural gas-rich shale and centers of high natural gas demand. Cramer says he feels better about Inergy after hearing from the CEO and recommends buying the stock.
"Washington holds the fate of the consumer in its hands," Cramer said. "For once, I actually expect the politicians to get it right." Low-end retail, such as Family Dollar (FDO), Autozone (AZO) and Dollar Tree (DLTR) will be affected by how Congress resolves the issue of unemployment benefits which are scheduled to expire. Congress is also expected to decide what to do about taxes, which will affect the wealthy shoppers who buy products at Coach (COH), Tiffany (TIF), Nordstrom and Ralph Lauren (RL). Cramer thinks the tax cuts and unemployment benefits will be extended; both decisions will positively impact holiday spending.
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