Mad Money: Among Department Stores, Nordstrom a Survivor
July 1, 2016,
NEW YORK—MSNBC “Mad Money” host Jim Cramer said Nordstrom is the department store most likely to survive an “ultra hostile” retail environment, based on its ability to withstand competition from Amazon, the decline of the shopping mall, overall shopping fatigue and other factors, which he detailed in his show earlier this week.
In his ranking of six department stores—“the most troubled group out there”—Cramer said J.C. Penney comes in second, followed by Dillard’s, with Macy’s and Kohl’s tied for fourth place “and the awful Sears Holdings coming in dead last.”
“Things have gotten so bad for this cohort that we need to start asking ourselves which of them has what it takes to survive this ultra-hostile environment,” Cramer said.
The fast talking Cramer outlined four criteria for his ranking: sales, survivability, balance sheet and strategic flexibility. He ranked each of the six retailers in each category before compiling the overall ranking.
In terms of sales, Cramer ranked Nordstrom as number one, followed by J.C Penney, Kohl’s, Dillard’s, Macy’s and finally, Sears.
Cramer determined survivability by each retailer’s rate of decline in earnings. Using this metric, J.C. Penney came in first, “the only store moving in the right direction,” due to its expanding margins, according to Cramer. After J.C. Penney came Macy’s, Dillard’s, Kohl’s, Nordstrom and Sears.
Based on the relative strength of its balance sheet, Cramer said Dillard’s comes in first because of its light debt load. J.C. Penney’s balance sheet is “heinous,” Cramer said, but he gave credit to management for its plans to pay off debt.
For its ability to withstand competition from Amazon, Cramer gave top marks to Nordstrom’s, which was one of the first to embrace the Web and who has spent $6 billion on its omnichannel business, according to Cramer. J.C. Penney, in second place, got credit for its turnaround play under CEO Marvin Ellison and his “savvy” moves, including a strengthened partnership with Sephora and “adding to the red-hot housewares category.”
Macy’s has struggled to adapt, Cramer noted, and said it is one of the reasons long-term CEO Terry Lundgren is stepping down. He said Macy’s has a lot of plans to turn things around but he hasn’t seen anything pay off yet. He waiting to see what happens under incoming CEO Jeff Gennette.