Mad Money

Cramer says department stores are in real trouble and Nordstrom is 'cannibalizing themselves'

Cramer chronicles the decline of department stores, and how Nordstrom is 'cannibalizing itself'

While some segments of retail are alive and well, Jim Cramer can't ignore the pain that department stores like Nordstrom are in.

For years, traditional mall-based retailers have struggled desperately to keep up with Amazon, and have made big moves to build out their omnichannel business to compete.

Unfortunately, for some retailers, it simply wasn't enough.

JPMorgan downgraded Nordstrom to "underweight" on Friday in the wake of recent meetings with the company's management team. Nordstrom was once considered the best in the business, but the stock declined nearly 9 percent after the note was released.

In its most recent quarter, Nordstrom delivered a 2.4 increase in same-store sales. However, management also indicated that the improvement in numbers benefited from one week of its annual Anniversary Sale that was shifted back into the quarter.

"Unfortunately, management keeps providing some very worrisome updates on traffic trends and the state of the consumer, conference call after conference call," the "Mad Money" host said.

The traditional department store seems to be in real trouble, and it's not just Nordstrom
Jim Cramer
Mannequins in retail stores, like in Nordstrom pictured here, are meant to draw shoppers in and inspire customers to put together similar outfits.
Ben Nelms | Bloomberg | Getty Images

Management also discussed website upgrades and cost savings, which worried Cramer even more.

"The better Nordstrom's website becomes the less incentive you have to actually go to their stores. In other words, they are cannibalizing themselves," Cramer said.

When JPMorgan discussed the worrisome meeting with Nordstrom, there was one point that really stuck with Cramer.

According to JPMorgan, Nordstrom said traffic levels in stores are the worst level since 1972. They talked about a widespread and accelerating shift away from bricks and mortar retail, and it seems to Cramer that management doesn't have a way to fix it.

The only real near-term fix Cramer could find was that aside from investments in technology, Nordstrom has been cutting costs to the bone to bolster its bottom line.

"The traditional department store seems to be in real trouble, and it's not just Nordstrom," Cramer said.

Ultimately, it seemed to Cramer that stores like Nordstrom are slowly decaying and there may not be a cure to fix it. This was just one more reason for Cramer to recommend buying Amazon.

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