Shares of the old-line department store operator saw their worst trading day ever after Macy's reported lower holiday sales for the end of 2018 and slashed its earnings outlook for the year. Management specifically highlighted women's sportswear, sleepwear, fashion jewelry, fashion watches and cosmetics as areas of weakness.
"It gave you the impression of a broad-based slowdown in consumer spending," Cramer said on "Mad Money."
But after seeing sportswear retailer Lululemon raise its fourth-quarter outlook, consumer technology giant Apple get supply-constrained for its increasingly popular Watch, and price-conscious companies like Amazon and Ulta Beauty seize on selling affordable makeup, Cramer started to think that Macy's weakness was company-specific.
"Put it all together and it makes me think that Macy's has some unique issues that simply don't reflect what's going on in the rest of retail," he said, adding that PVH, the apparel manufacturer that sells its products in Macy's stores, recently issued a positive pre-announcement of its quarterly results.
That's why investors can't always look at the retail sector as one bucket of similar companies, the "Mad Money" host said.
"To me, the real takeaway from the Macy's madness is that you've got to go category by category," Cramer explained. "When you do that, you realize that retail isn't a losing ETF, it's a sector with both winners and losers. If you want to try to make money by picking stocks, you need to be able to tell the difference."