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Cramer navigates treacherous retail

Friday, 22 Nov 2013 | 6:22 PM ET
Retail's become treacherous: Cramer
Friday, 22 Nov 2013 | 6:25 PM ET
Mad Money host Jim Cramer breaks down the retail sector from the strongest names to the weakest.

(Click for video linked to a searchable transcript of this Mad Money segment)

"Retail has become downright treacherous," said Jim Cramer. Stocks that should be doing quite well just aren't. "I can't remember being more puzzled over a sector of the market."

In an attempt to get a better grasp of developments, the "Mad Money" host has sifted through piles of earnings.

And he's found that rather than view retail as an homogeneous sector play, he thinks it's much more prudent to dig down into the single stock stories. "I think I finally have a handle on it," he said.

Here's what Cramer thinks you need to know.

First retailers that offer value at a low price point are thriving, as long as management is running the company well.

"Who fits that bill? Costco and TJX which reported terrific quarters, much better than almost any other retailer," said Cramer.

Although Costco has rallied recently TJX sold off in sympathy with rival Ross Stores which issued a forecast that disappointed. "I wouldn't hesitate to buy TJX on Monday if it's still down," said Cramer.

Pete Gardner | Digital Vision | Getty Images

Looking at the home improvement stocks, Cramer says best of breed is the way to go.

"Home Depot had been lagging Lowe's going into their reports earlier this week. Home Depot put up terrific numbers while Lowe's didn't. It was a vicious reminder that best of breed is the way to go and Home Depot is best of breed," Cramer said.

Turning attention to sporting goods, Cramer said, "Dick's and Foot Locker reported excellent numbers but only Footlocker bounced. Dick's is lagging but it shouldn't be." Cramer is looking for Dick's to play a new game – catch up.

Elsewhere in the sector, Cramer says big discount retails seem to have lost their way.

"Wal-Mart, Target, Kohl's and JC Penney have to do some real soul searching after these numbers," Cramer said. "There's a staleness here and a sense that these companies just don't offer what consumers want. I can't think of a reason to buy any them right now."

Surprisingly organic and natural groceries sparked some nasty surprises, too.

"Fresh Market skidded lower Friday after it reported disappointing third-quarter results and cut guidance for the full fiscal year. "Meanwhile, Fairway also had a tough quarter," Cramer added.

Although some investors take results to mean the entire space is challenged, Cramer doesn't think that's the right conclusion. He believes healthy eating is a theme that should endure for some time.

"If anything, I feel better about Whole Foods," Cramer said. I don't see operational issues with Whole Foods and amid these lowered expectations for the sector, I think Whole Foods can get through this period without too much more downward pressure."

Then there's teen apparel. "This group is a disaster," said Cramer. The Mad Money host just didn't have anything good to say about these companies. "I don't think there's a reason in the world to own any of these stocks."

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Finally there's electronics and video games. In the space, Cramer noted that Best Buy and GameStop were both hammered after they expressed concerns about the competitive environment for the holidays.

"I say use the reset that they gave you, and the weakness that pervaded the stocks after it, to buy both. What a gift that these two turnaround plays de-risked their stocks with the new videogame consoles coming out. I want some of both for the holidays. "

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com

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