Is the trade-down trade over? Are people stepping up to brand-name products? Boy, what a tough call that is. But when I analyze the guidance for Perrigo (PRGO) and Dollar Tree (DLTR), two of my favorite companies and classic trade-down plays, I have to admit that I'm fretting a bit.
The crosscurrents here are mighty. We know high-end stores are doing well and so-called midrange plays like Macy's (M) are incredibly strong. But we also know that Wal-Mart's (WMT) not strong and is doing shockingly poorly, so poorly that you have to ask yourself if people simply feel better about shopping at more expensive places. Then again, the hottest area of all is the TJX (TJX) / Ross Stores (ROST) bargain-hunting segment, and I have to wonder whether they aren't hurting Wal-Mart as they gain tremendous scale.
Maybe you have to reach a conclusion that says people don't need to go to Dollar Tree or Wal-Mart when they can go to the next level up that makes you feel better about yourself.
Perrigo's even tougher. PRGO has feasted off the strapped consumer, the branded to over-the-counter and, most importantly, the bungling of Johnson & Johnson (JNJ).
While we still have some important drugs that can be knocked off, such as Mucinex, I don't see the pipeline as robust as Perrigo does. And, you have to admit, it is impossible to picture a world where the recalls keep occurring at J&J now that the much-sainted William Weldon -- late of the "Mad Money" Wall of Shame -- is now out. Plus this weather has negated a lot of the cold and flu season.
Perrigo and Dollar Tree have been huge winners for people. I think they now deserve a breather until we get more confirmation that the secular story is in still intact and the cyclical positives to the economy haven't eliminated the wind that's been at both these companies' backs for many years now.
More from Jim Cramer: