- "If you're not offering a great digital experience or nearly unbeatable bargains ... you are in trouble," CNBC's Jim Cramer says of retailers.
- He juxtaposes the stock action and earnings reports from Kohl's and Target to make his case.
- "I say wait for the next round of tariff hikes or nasty trade rhetoric ... to knock down the whole group, and then buy the retail winners into the weakness created by the ETFs and the overall market," he says.
Tariffs on Chinese imports are not the biggest weight on the retail cohort, according to CNBC's Jim Cramer.
Retailers must win in the current environment by either having a strong online presence or offering discount prices, he told "Mad Money" viewers Wednesday.
"If you're not offering a great digital experience or nearly unbeatable bargains ... you are in trouble," he said after Wall Street received a mixed bag of earnings reports from the industry.
The winners and losers in retail are singing diverging tunes about the consumer, making it tough to get a read on the broader economy from the industry, Cramer said. He made his case by highlighting the earnings beat and raised guidance from Target and earnings miss and cut from Kohl's in their latest quarterly reports.
Target has spent recent years investing in its online business, and the results appear to be paying off. Digital sales bloomed 31%, powered largely by its same-day options such as in-store pickup or delivery via Shipt, the company said. Net sales improved 6.1% year over year.
"That's one reason the stock surged 14% today in the wake of a terrific quarter," Cramer said.
Beyond its web-based business, Target's apparel sales grew more than 10% in the quarter.
That juxtaposes Kohl's, whose management said an "increasingly competitive promotional environment" was part of the cause of declining sales and earnings in its own fiscal third-quarter performance. The department store also cut its profit outlook for the full fiscal year, at a time when brands such as Nike are turning away from third-party retailers to sell their products out of their own stores and websites.
Kohl's shares tanked nearly 20% in Tuesday's session, its biggest single-day percent drop, according to FactSet. The stock is down more than 26% on the year.
"Their problem is simple: They don't have anything special" digitally "that can compete with Target or with Walmart, let alone Amazon," Cramer said. "It's a department store, not an off-price chain like TJX or Burlington Stores — both of which I like very much — and in this new world, Kohl's ... just isn't good enough."
Earlier this month, Cramer said the off-price retailers of TJX Companies, Ross Stores and Burlington Stores have their own winning business models.
Cramer dismissed the idea that U.S.-China trade tensions could be hurting retail, saying those who worry about that are "asking the wrong question." Investors should be worried about whether retailers are investing money to build out their online presence with technologies from companies such as Zendesk, PagerDuty or Salesforce.com.
He called other retailers such as Lowe's and Walmart winners here.
"I say wait for the next round of tariff hikes or nasty trade rhetoric ... to knock down the whole group, and then buy the retail winners into the weakness created by the ETFs and the overall market," he said.
Disclosure: Cramer's charitable trust owns shares of Salesforce.com, Amazon and Kohl's.