• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing
  3. / Consumer Discretionary

Cramer: Retailers and the Mystery of Millennials

Contemporary shopping and buying trends continue to confound established stores.
By JIM CRAMER May 11, 2017 | 03:08 PM EDT
Stocks quotes in this article: M, NVDA, AAPL, AMZN, GOOGL, ATVI, STZ, DPZ, NFLX, EA, TTWO, SNAP, TJX, BURL, OLLI, DIS, FB, SIX, MAR, PLAY, EXPE, FL, PLCE

The darned kids grew up. They grew up and they are taking over and we have no idea what they are doing, or we are trying to adjust so quickly and just can't move fast enough.

That's how I feel about yet another day that looks placid, but there are big changes underneath.

What do I mean by "we" and "they"? There's a group of consumers who simply aren't like any other. They are the millennials, and many of the people who run companies these days just have no idea what millennials are up to or what they think is right or how different, generationally, they really are.

These millennials, frankly, might as well be aliens. Clever, tricky aliens, and they are just not bound by any of the traditional ways that the people in charge think. Oh, and even if you can think like them, it may not matter. You might have so much at your enterprise that you can't pull it off anyway because of structural concerns.

Every time we think some of these old dogs have figured out the new tricks, the dogs get eviscerated as the tricks change again.

Case in point: Macy's (M) . This morning Macy's reported some truly hideous numbers, missing estimates for everything from the earnings to the sales to the comparable store figures, the latter being the key metric we always monitor.

Why?

I will let Jeffrey Gennette, the new CEO, tell you from his conference call: "So firstly these are unusual and challenging times for retail, especially for mall-based department stores, and we certainly know that these changes that we're seeing are secular and not cyclical," meaning they aren't going to change with the times or the economy, they are going to continue along these lines, and perhaps accelerate.

Then Gennette goes on, "On the consumer side we see continuing shifts in shopping trends driven by the rapid adoption of technology, and for some of our customer segments a greater emphasis on value and on experience. As for the retail industry overall," he continues, "we've known for some time that the United States is over-retailed compared to other markets, so it's not surprising to see the contraction in retail square footage and it will take some time to tell how the consolidation and the closure of stores, and in some cases entire brands, will impact us."

So let's take these one at a time. The rapid adoption of technology refers to the smartphone and how it empowers millennial shoppers, who don't want to waste time shopping and do a lot of homework before they go to the mall. They pick up their iPhone, they go to Google or Amazon to compare and contrast and they either go right to the store that might be having a sale, or they buy on Amazon if they don't have a car -- many don't, they use Uber.

Sometimes they don't even get off their duffs because they are too busy multitasking, most likely watching Netflix or playing Call of Duty or looking at their Facebook or Instagram page while they order a Domino's pizza and crack open a beer. Or they just bark at Alexa and the box arrives the next day.

Soon they won't even have to search, they will just yell at Alexa to get the best value for an item and she will search and send it the next day. That's deep learning and Nvidia (NVDA) , with its stock up huge today, is going to make that possible in a couple of years.

That's why we like the stocks of Apple (AAPL) , Amazon (AMZN) , Alphabet (GOOGL) , Activision-Blizzard (ATVI) , Constellation Brands (STZ) , Domino's (DPZ) , Netflix (NFLX) and Nvidia so much. You can sub Electronic Arts (EA) and Take Two Interactive (TTWO) for Activision-Blizzard. They are all benefiting from the same trend.

In this world, the bricks-and-mortar store is actually of negative value. The only real reason a retailer wants to be a tenant in this day and age is to be able to sell you not only what you want but also what you didn't set out to get. But if you are ordering and picking up or making a beeline for what you want, then the whole point of a retailer in a mall is lost. That rent's too high. So you can close all the stores you want that aren't making money, as Macy's is doing, and then you will discover that, as more and more kids grow up and become this kind of consumer, the profitable stores will become unprofitable. And so on and so on.

So can Macy's offer the experience Gennette says they want? I don't know, you go to a Macy's and what do you see? A bunch of cheap plastic hangers on racks with a lot of crooked red signs that say "sale." The experience people seek is something that can be memorialized on their Instagram page. You don't want that place on your page. Judging by the lack of growth in the new daily average users at Snap (SNAP) , it would seem they aren't using Snap at Macy's either.

And how about the consolidation and closure? If Macy's were the last man standing, that one-by-one thing. But the fact is that even as we have had 4000 stores close this year already, we have, according to Matthew Boss from JPMorgan, six times as much retail space as we need. The over-storing is totally wrong at a time when the technology reigns supreme, with the only real winners being those that buy the goods that can't be sold from the stores that are closing, meaning places like TJX (TJX) and Burlington (BURL) and Ollie's Bargain Store (OLLI) . They are all going down today, but that's the opportunity.

No traditional retailer like a Macy's can possibly keep up with that headlong change, even if they had time to think about it, as was the case with Macy's, which did see it coming but remained cavalry in the face of the internet's tanks.

What else are the millennials screwing up? Television. I know we have heard endlessly about the cord cutters because they don't want to spend money on that big cable bill. But it is the shout-out to the cord nevers, for example, that we heard on the Walt Disney (DIS) conference call that's really got people going. A cord never is someone who's not looking at traditional advertising. You can only reach that person online. That darned cellphone has supplanted the television, as we heard from Apple CEO Tim Cook when he discussed the phenomenally successful iPhone 7 Plus.

Now understand that there's plenty of winners in this world. Go to your App Store and see them. Crack open your cellphone and you can see them. Open your watch and they come tumbling out.

There are tons of companies that cater to Facebook (FB) -friendly experiences, from Six Flags (SIX) to Marriott (MAR) to Dave & Buster's (PLAY) and Expedia (EXPE) . And there are two mall stores that still work -- Foot Locker (FL) , because people like to try on shoes, and Children's Place (PLCE) , because kids are finicky and grow up fast. (Apple, Alphabet, TJX and Facebook are part of TheStreet's Action Alerts PLUS portfolio.) 

But for the most part, this new world's running roughshod over all consumer-oriented entities, and what we have learned is it no longer matters if you see it coming. It runs over you anyway.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long AAPL, GOOGL, TJX and FB.

TAGS: Investing | U.S. Equity | Consumer Discretionary | Technology | Earnings | Jim Cramer | E-Commerce | Stocks

More from Consumer Discretionary

It's Hard to Say What's Cookin' at Weber, Though It Smells Like a Short Squeeze

Jonathan Heller
Aug 17, 2022 11:30 AM EDT

The grillmaker's stock has traded wildly and heavily at times, most recently this week after it posted its latest results on Monday.

A Cannabis ETF and a Micro-Cap Stock That Have Grabbed My Attention

Bob Byrne
Aug 15, 2022 8:30 AM EDT

The ETF is showing signs of perking up and the micro-cap is a maker of electric outboard motors.

Fossil Group Sounds the Alarm While NL Industries Rewards Its Shareholders

Jonathan Heller
Aug 12, 2022 10:30 AM EDT

The former signaled lower revenues for the year while the latter declared a healthy special dividend.

Disney Is Firming Up a Bit Ahead of Earnings

Bruce Kamich
Aug 8, 2022 8:36 AM EDT

The charts of the entertainment giant are modestly positive before it reports fiscal third-quarter results after Wednesday's close.

Put e.l.f. on the Shelf as the Stock Surges to a 52-Week High

Bruce Kamich
Aug 4, 2022 2:31 PM EDT

Here's why investors should consider taking profits now.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 02:23 PM EDT STEPHEN GUILFOYLE

    We're Cleaning Out This Retailer From the Bullpen

    Check out the latest moves in TheStreet's Stocks U...
  • 10:24 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    To Improve Your Trading and Investing, Spend More ...
  • 08:44 AM EDT PETER TCHIR

    CPI Beats Expectations, But Maybe Not the 'Whisper'?

    Slightly better-than-expected inflation across the...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login