Dollar Tree and Dollar General also collapsed when they missed earnings estimates and cut guidance due to competition.
"In fact, (Dollar General) point blank cut prices on 400 products to stay ahead of a newly energized Wal-Mart. That's disastrous," Cramer said.
Specialty players L Brands, Urban Outfitters, Foot Locker and Dick's were the only stocks not pulled down by the gravitation of retail, but Cramer still worried that they could fall.
Investors once thought that housing-related stocks were the safest in retail. But then HD Supply and Tractor Supply reported weak quarters, and have managed to bring down Home Depot, too.
Discounters and close outs are the only group that Cramer believes in. His charitable trust just purchased TJX because it looks like a solid play going into the holidays and a place for Macy's to dispose of merchandise when it closes 100 stores.
However, the weak quarter reported by Pier 1 could also pull it down. The only winner, according to Cramer, is Ollie's Bargain Outlet Holdings.
The nastiest of the bunch were the department stores, with Macy's wallowing, Kohl's slipping away, and Nordstrom losing momentum from its last quarter.
Ultimately, retail must snap back, or Cramer fears that the entire stock market could only get worse. If positive news surfaces surrounding back to school season, it could reverse.
"Right now all I can hear when I think about retail is King Midas in reverse. That is not the direction you want if you believe that this market can go higher without first having a more pronounced decline, like we saw today," Cramer said.