You have to worry about what's expensive. No, not expensive in stocks. We know that any stock of any company that has a shortfall is per se expensive, and we have those all over the place.
I'm talking Burberry, the phenomenally good clothing company that has done so much to reinvent itself from a stuffy raincoat to one the most fashion-forward retailers.
But this morning, Burberry simply missed the quarter in a way that says not that Burberry has the wrong product line but that the right product line isn't selling at the same pace it had been. To me, that's another example of the world slowing, not Burberry slowing, and it has to be noted in the same way we have seen Tiffany (TIF) fall and Coach (COH) roll over.
The company is not doing badly. It had 11% revenue growth. But when you consider the previous quarter's growth came in at 15% and the quarter before it at 21%, you can see the pattern.
There was an immediate tendency by the critics to blame China for the weakness. That's too simple. It's global. If anything, I believe China held up rather well, and the company plans to take the number of stores from 63 to 100.
I was far more concerned that Burberry, the largest U.K luxury goods maker, couldn't do better in the Americas. The company had a strategy reshuffling that capped the results, but that is of no interest to me. What does worry me is that this is one more sign that people are pulling back everywhere.
Burberry makes a case, but it isn't for Burberry. It's for Dollar General (DG). It's for Wal-Mart (WMT). It's for Ross Stores (ROST). That's where people want to shop. It makes the case for Target (TGT), which has joined forces with Neiman Marcus -- and if Neiman were public, I would like to short its half of the deal and buy Target. I am not alone as Target has been almost as red-hot as Wal-Mart, another of my favorites here.
So what do you not want to be in? Polo Ralph Lauren (RL) reported an amazing quarter, and it has done little but go down since. I think you have to avoid it -- too risky.
Tiffany and Coach? Sure, it is tempting to call the bottom of these terrific franchises. I am not good enough to do that. Just too hard.
We are in reset mode for the high end right now. We will know when the bar is low enough when these fine companies report in line (not above, but in line) and they don't go down. It's a bummer not to be able to say "come on in, the businesses are fine," but with this Burberry announcement, the luxury end of the pool has become shark-infested. You want retail? Think bargains because that's where the bargains are.