TheStreet.com's Jim Cramer says it could be part of a strategy to pounce when the economy sagged. Lowe's can take the pain; Home Depot can't. Maybe Lowe's (NYSE: LOW) (Cramer's Take) sees what we saw this morning: A Home Depot (NYSE: HD) (Cramer's Take) that's a shadow of its former self. Maybe LOW is pulling a Verizon (NYSE: VZ) (Cramer's Take) and just going out to destroy the competition with lower rates and short-term hits to performance.
Yesterday I was torn between what really drove up the price of Lowe's: the January low point with February showing some improvement, or an overall belief that the early cycle is starting and the economy has bottomed courtesy the Fed rate cuts. The reaction last night to Nordstrom (NYSE: JWN) (Cramer's Take) was similar: terrible earnings but hope that things will get better. It's is now well above where it hit its low and it is hard for me to believe that it could go back there.
You couldn't tell which theory was winning out for either Lowe's or Nordstrom because I am sure you had buyers of both plus the ubiquitous short-sellers who lurk everywhere and are prone to cover on a moment's worth of positive price action (as we saw in Goldman Sachs (NYSE: GS) (Cramer's Take) yesterday before a new round of estimate cuts, courtesy special purpose vehicles that some alleged cognoscenti will claim they saw coming).
But today I am thinking about something that Lowe's CEO Bob Niblock told me a year ago. He said that this was going to be a deep one, this domestic recession (domestic because the companies that do business predominantly internationally must be asking themselves every minute, what the heck are these home-related companies doing wrong!) and he was going to use the downturn to change the order of things. Perhaps the new stores, which I remain against, are going up head to head against "bad" Home Depots or of course, "horrible" Sears (NASDAQ: SHLD) (Cramer's Take) and are just ripe for the pickings.
When I see the Home Depot -- and I know Sears will be far worse -- I recognize that Niblock strategy outlined to me in a breakout session I crashed at the fabulous Bank of America (NYSE: BAC) (Cramer's Take) (will it still be?) retail conference.
Now, of course, if the early cycle theory wins out, even Home Depot will go up but to me it is clear that the order is being re-ordered and we are going to consider and see Home Depot for what it really is: a once great retailer that is now vulnerable to severe declines courtesy a full court press by Lowe's where Lowe's can take an immense amount of pain -- as can its shareholders -- and Home Depot can't.
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Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer had no positions in the stocks mentioned.
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Reader Comments (Page 1 of 1)
2-26-2008 @ 11:13AM
Bob said...
Were we listening to the same results this morning? I am an employee of HD and am excited by the direction Frank Blake and corporate are going. There is pride again in the stores and morale is very good. The changes I heard were all to promote getting the products into the store quicker for our loyal customers. As for Lowes, I have never seen a company fly under the radar and get unscathed like they do. If they are better it is on our game plan. After all, everything we do they copy (ex: $199 install). Wlak into their stores and you will fid that service there is nothing to write home about. Or is a 33% dip in profit something they and you are excited about??
2-27-2008 @ 11:33AM
Thomas Jowers said...
I am an employee of Sears and didnt they all copy sears with the installation thing?
Isnt sears the largest home appliance retailer"
Largest tractor (riding mower) retailer
largest fitness equipment retailer
i should know i am trained in Lawn and Garden, Fitness Equipment, Tools, and Electronics.
Sears is sending me to Dallas next week to do more training on Lawn and Garden equipment, that is why Sears Associates are more educated on the products they sell.
If you have any questions about any Lawn and Garden products that you purchased from sears, just call the abilene sears and ask for Thomas, I will talk to you one on one. Thats a promise.
5-20-2008 @ 2:38PM
7 years at the HD said...
Doesn't k-mart own sears?