Cramer: Winterwear maker Canada Goose is 'best of the bunch' in recovering retail sector

  • CNBC's Jim Cramer explains why investors are circling back to retail stocks and shares his top picks in the space.
  • Canada Goose remains "dominant" among its competitors, the "Mad Money" host says.
  • Cramer also defends Nike as the shoemaker's shares slide after earnings.

When bull markets take hold, investors and analysts tend to circle back to forgotten sectors and find new ways to push the stocks within them higher, CNBC's Jim Cramer said on Wednesday.

"That's why, on a day when the averages got slammed in the wake of the Fed meeting, we still had some unusual pockets of strength. Pockets like retail," the "Mad Money" host said, adding that Wednesday's boost in the retail stocks was driven in part by a research report from D.A. Davidson, a boutique Wall Street firm.

In it, analysts flagged four reasons why retail stocks could still go higher: the resilience of mall-based shopping, an increased focus on merchant talent, the power of branding and strong product positioning.

"Notice these are not new concepts. They've been buoying the retail cohort for months," Cramer said. "But with the group taking a break in recent weeks because of the tariffs, it was time for a new look and the thirst for these warmed-over ideas was downright incredible."

The "Mad Money" host noted how much some key retail stocks have rallied in 2018: TJX Companies is up 46 percent; Burlington Stores is up 34 percent; and Canada Goose has surged 101 percent.

"Believe it or not, I think Canada Goose is best of the bunch simply because we're going into the best time of the year for this maker of fancy fur-lined coats and parkas," Cramer told investors. "I know Canada Goose has been diversifying away from winterwear, but this is still the season they're practically synonymous with."

Davidson's thesis was also buoyed by Nike's Tuesday earnings report, which pushed shares of the athletic apparel and shoemaker lower despite the company's double-digit profit growth, Cramer said.

"I know when you see an iconic stock like Nike get slammed, ... you assume that, 'Hey, that stocks telling me that business can't be as strong as we thought.' But then you would be dead wrong," Cramer said. "In the case of Nike, the stock had already soared: even after today's decline ... it's up nearly 34 percent for the year. You know that's the best performer in the Dow [Jones Industrial Average]?"

Wall Street has waffled on Nike since the company released its controversial ad campaign involving former San Francisco 49ers quarterback Colin Kapernick. But given that sales weren't affected by the subsequent uproar, Cramer said traders could come back around to the sportswear play.

"Here's what matters me: Nike's U.S. customers were not deterred from buying some very expensive sneakers. Hey, don't forget that's Nike's real stock in trade," he said. "That's good news."

All in all, with tariffs not yet trickling down to consumers, mall-based shopping alive and well and both discount and luxury retailers staying afloat, the return of retail didn't come as a huge surprise to the "Mad Money" host.

"That makes fund managers want to buy everything from Nike retailer Foot Locker to Best Buy ... to Canada Goose," he said.

"That's right. When there's nothing new, you just circle back to the old, a special antidote to the Fed blues. As silly as it sounds — take it from this old hedge fund manager — that's exactly how bored traders operate, and it's why retail managed to buck the gravitational pull of the averages today," Cramer concluded.

Canada Goose's stock surged 9.74 percent on Wednesday, settling at $63.64 a share. Nike's stock dropped 1.29 percent, closing at $83.70 a share. The SPDR S&P Retail ETF, which holds an assortment of retail stocks including Kroger, DSW and Autozone, was up nearly 1 percent as of Wednesday's closing bell.

WATCH: Cramer explains the retail rebound

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