“I’m talking Burberry, the phenomenally good clothing company that has done so much to reinvent itself from a stuffy raincoat company to perhaps the most fashion-forward retailer that I know, at least, I like to go to, and I am sure not alone,” he said.
Burberry’s quarterly earnings showed that “the right product line isn’t selling at the same pace it has been,” Cramer said.
“To me that’s another example of the world slowing, not Burberry slowing, and it has to be noted in the same way we have seen Tiffany fall and Coach roll over.”
That’s not to say the high-end fashion retailer is lackluster, by any means. It posted 11 percent revenue growth, albeit compared to 15 percent the previous quarter — and 21 percent the quarter before that.
Analysts’ tendency to blame the results on weak China demand is too simple, Cramer said. “It’s global. If anything I believe China held up rather well, and the company plans to take the number of stores from 63 to 100.”
Instead, he was far more concerned about the company’s performance on this side of the pond.
“What does worry me is that this is one more sign that people are pulling back everywhere,” Cramer said.
The results, he added, make a case for such names as Dollar General, Wal-Mart and Ross Stores.
“It makes the case for Target, which has joined forces with Neiman Marcus, and if Neiman were public I would like to short its half of the deal and buy Target,” he said. “I am not alone as Target’s been almost as red-hot as Wal-Mart, another of my favorites here.”
Think Ralph Lauren might be another way to play the space?
Cramer cautioned about that.
“I think you have to avoid it,” he said. “To me RL is the analogue to Burberry that’s become too risky for me.”
Likewise, a challenging sales environment for PVH and VF Corp. in Europe and Asia provides a hint about what may lie ahead. It’s also too soon to call a bottom in “terrific franchises” Tiffany and Coach.
“We are in reset mode for the high end right now,” Cramer said, calling the competition among luxury brands “shark-infested.”
“”You want retail? Think bargains because that’s where the bargains are.”
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