On tonight’s Mad Money on CNBC, Jim Cramer said he is adamant of a RATE CUT from the Federal Reserve and sticking his head out waiting for it. He still thinks the way to play this is by being in best of breed and solid retail stocks, particularly since this is FASHION WEEK. He has one play he thinks is a big buy, but there are also a couple retail stocks in fashion and apparel that you should avoid.
The one Cramer loves and thinks you should own right now is Phillips-Van Heusen (NYSE:PVH), which owns Calvin Klein. That isn’t the only brand and isn’t the only good brand. It licenses Kenneth Cole, DKNY, Joseph Abboud, and has IZOD, Bass, Geoffrey Beene. He thinks this may be immune from missing estimates and will grow from the outside of the US sales. It also has 725 outlet stores it sells through. PVH rose 1.5% to $56.00 after the Cramer call, but shares were down 1.9% in normal trading and closed at $55.18 in normal trading.
A call-in during the first ‘avoid segment’ was actually from an overstock retail specialist, and Crameragreed that there is major discounting and overstocking going on inapparel right now. Cramer still thinks the way to key off of goodretailers is by gaging the Fed ahead of rate cuts. In the call-insegment he was positive on Gap (NYSE:GPS), Dollar Tree (NASDAQ:DLTR),and American Eagle Outfitters (NYSE:AEO).
CRAMER’S AVOID LIST FOR NOW
Perry Ellis (NASDAQ:PERY) is a fairly unfashionable label that blew away earnings, but the quality of earnings was a beat because of cost cuts and they are a mid-tier fashion brand. This is also the most at risk if Cramer is wrong on the rate cuts, and he’s concerned about Perry Eliis’ future. It also gives no dividend and has no share buyback plan.
Ralph Lauren (NYSE:RL) is a best of breed clothier, and Citigroup just started it as a Buy this week. On August 8 the earnings miss punished the stock after an earnings warning. He said he gave the management the benefit of the doubt right before the retail stock slide happened. Tonight Jim Cramer is saying now that he cannot recommend this one now, and he said he’s sitting on the sidelines now. Blowing a quarter means you have to weigh the risk/reward a quarter later to make sure this isn’t a one time event.
Jon C. Ogg
September 5, 2007
Jon Ogg can be reached at jonogg@247wallst.com; he produces the 24/7 Wall St. SPECIAL SITUATION INVESTING NEWSLETTER and he does not own securities in the companies he covers.
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Earnings season has mostly wound down, but as always at least some major companies are reporting earnings. Some are actually market-movers as well and it is a short week with earnings out only Monday and Tuesday, with a few on Wednesday. On deck are Hewlett-Packard Company (NYSE: HPQ), Tyson Foods Inc. (NYSE: TSN), Campbell Soup Co. (NYSE: CPB), LDK Solar Co. Ltd. (NYSE: LDK), Tech Data Corp. (NASDAQ: TECD), Barnes & Noble, Inc. (NYSE: BKS), Borders Group, Inc. (NYSE: BGP), J. Crew Group, Inc. (NYSE: JCG), Dollar Tree Inc. (NASDAQ: DLTR), and Deere & Co. (NYSE: DE).
These are the early bird analyst calls with upgrades and downgrades from Wall Street this morning with about two and a half hours until the market opens:
