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With Fashion Week under way in New York City, Cramer wants to show Home Gamers that he’s “with it” by reviewing the designers. Fashion Week isn’t reason alone for him to recommend clothing designers, but he believes the Fed will ease rates – and that means that some retailers are coming back into fashion and Cramer thinks they can now be bought, even after today’s weakness.
This is a good time to get in on a good company that makes clothes, Cramer said, but you need to be careful and only buy best of breed. That’s why he thinks you should stay away from Perry Ellis [PERY
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Wall Street is really just one big fashion show itself, but not every fashion stock has what it takes to get noticed on the runway. Case in point: Perry Ellis, one tragically un-hip label, Cramer said. The company actually had a big upside surprise last time it reported, with earnings per share coming in 16 cents over estimates. But Perry Ellis didn’t beat because its clothes were flying off shelves. It beat because it shifted around marketing expenses. Big deal, Cramer said.
A stock like Perry Ellis needs to be evaluated by its brand and what the company is doing for shareholders. Cramer isn’t excited by the Perry Ellis brand, nor is he by its other brands like Cubavera or Dockers. And the company has no buyback and no dividend, so there’s not much in it for shareholders either, he said. In the world of fashion stocks, PERY simply doesn’t fit Cramer.
But there’s more to these stocks than just the brand. Take Ralph Lauren, a strong, well-known and popular brand. Citigroup just initiated coverage with a buy, but Cramer still isn’t on board, even though he admits RL is a good company.
Last month Ralph Lauren missed earnings and lowered guidance and the stock got pounded. It was the company’s first miss in a while and Cramer gave it the benefit of the doubt. Even still, RL dropped the ball and Cramer cannot recommend it. He said there’s no reason to own a stock that cut its forecast less than month ago, especially since management blamed higher tax rates. Great companies rarely have shortfalls because of tax rates – instead, they find a way to beat them.
Ralph Lauren will bounce back eventually, Cramer said. It has some international growth opportunities, a $250 million buyback and some insider buying. Unfortunately, this is all too little too late for Cramer. The buyback isn’t enough to give the stock style, and the insider buying is relatively small. Until there’s a sign it won’t disappoint the next few times it reports, Cramer wants nothing to do with the company.
Bottom Line: Fashion stocks are back just in time for Fashion Week, Cramer just doesn’t think you want Perry Ellis or Ralph Lauren. There's a retail stock out there with much better style.
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