You know what is driving me crazy? The same thing that makes me happy: The unbelievably positive numbers we are going to see from business-to-consumer stores and restaurants.
This week we are going to hear from Walmart (WMT) , Home Depot (HD) , Lowe's (LOW) and Target (TGT) and if they get hit for any reason, you need to buy their stocks, because they are up against general merchandisers, hardware stores, sporting goods businesses and lumber yards, all sorts of stores that were deemed non-essential by governments everywhere.
These winners and others not reporting, like Costco (COST) , have so many advantages over the little guy that it is amazing that there is any competition whatsoever. And soon there won't be. Sure, enough of their competitors own their buildings. They had been able to hold their own against the big guys. But all of the big guys have crafted these fabulous same-day deliveries that can't be beaten, except by Amazon (AMZN) , which is precisely why they offered their alternatives, Anyone, for example, who has used Shipt from Target knows it can be there within the hour, as we have used them for props on a ton of pieces we do on the "Mad Money" show.
I, by no means, want to slight the destruction that we are going to see in restaurants. Today Domino's (DPZ) announced it needs 20,000 delivery experts, pizza makers, managers and assistant managers. Do you think they are doing that because there is a sudden surge in people eating pizza? No, as anyone in the industry knows -- and I am in the industry -- they are doing it because they are taking share from the smaller parlor that often relies on two sources of income: the indoors and the outdoors.
There are plenty of makeshift restaurant fronts now, outdoors, but there are plenty of risks involved, especially the weather. But most importantly, pizza parlors often have tables inside, where plenty of liquor can be served and that's where the profit margin is. If you can't have people inside -- think New York City -- and you can't afford to have delivery, as the delivery services charge too much -- you are not going to stay in business. Domino's will find those employees; they will come from the small businesses that can't make it, especially now that the paycheck protection program has run out. Oh, and you better believe that when we finally get driver-less vehicles, Domino's will be the first users. All they have to do is set the GPS to the right place. As it is now, I love getting Domino's, because I can put the tip on the bill and they will put the pizza on a contact-free pedestal that makes me feel incredibly comfortable vs. the local guys. Pizza Hut (YUM) and Papa John's (PZZA) deliver, too. When we have to deliver from our place, we use our waiters. It's the only way we can afford it and, believe me, it is a lot less lucrative than when people come inside and sit down.
It's not just pizza. We have been seeing recommendation after recommendation for Darden (DRI) , commonly thought of as Olive Garden, and Yum, both of which have the wherewithal to deal with a dramatic decline in the number of seats at their restaurants, because they have been able to transition to take-out and delivery. Chipotle's (CMG) so good at all of these digital ventures that it can make as much with delivery and take out as it can with sit-down dining. That's extraordinary, and it is also why the stock is over $1,000, which needs a split badly in order to get more retail investors to own a piece of the company. I think that people continually misjudge scale. Chipotle sells Topo Chico, the best fizzy water in the world, for less than we can pay for it at Bar San Miguel. But here's the deal: they should. They have volume, so of course they should get a lower wholesale price.
I think that Starbucks (SBUX) could be in the same category. If you are a landlord you want a Starbucks. They will pay. They just won't pay what you would like them to. But it beats being empty.
How about those big boxes? Do you know the scale with which they can buy things from manufacturers? Believe me, a lot of these small businesses pay the manufacturer the same price that the big box stores sell them. I remember when Jim Senegal, the former CEO of Costco, told me that some men's store managers would buy shirts at Costco to sell at their stores.
I don't think many people realize how precarious so many businesses are. There is an amazing piece from Jefferies on Monday titled: "Fitness Wars: Planet Fitness (PLNT) Traffic Monitor update: We see Stabilization Ahead." In it, we learn that Planet Fitness is seeing 61%, 58% and 53% of normal traffic in Georgia, Florida and Texas. Not so hot, right? But, according to Jefferies, there are 35,000 independently owned and operated mom and pop gyms in the U.S. which are most likely more thinly capitalized than Planet Fitness. Let's also remember, as Jefferies reminds us, in a recession the trade down from expensive gyms, and I am talking about places that cost thousands of dollars, is pretty easy to do. I can tell you that the franchisees are very endowed and the cleanliness is next to, well, you guessed it.
Now, remember the PPP program kept a lot of competitors in the game. But that's over, and, perhaps, the most important delta here is the failure of the Democrats and Republicans to agree to the next round of aid that could have helped small business. I had hoped there would be business interruption insurance that could keep restaurants alive, until there is a vaccine, because, after all, the loss of half your tables and half you bar stools is most certainly not your fault. I know in a harsh way we could argue that it's Darwin at work. There will be restaurants that can make it, they just need the others to go under so they can take over.
Let me tell you, that's just plain silly. We are a people who want more than Pizza Hut and KFC and Olive Garden. Going out is integral to our lives. But what we have discovered is that, like my parents, we can cook and we can all sit down for dinners and have a better time and then save going out for the big days, birthdays, Mother's Day and the like. Growing up in a town with one nice restaurant, the one I worked at, in the 1970s, I can tell you that most of the people who came to it were there for a special occasion.
I fear, with costs the same -- it isn't like the rent's being slashed to nothing -- but with half the customers, opening a restaurant until we get closer to a vaccine is strictly a labor of love, not a labor of employment. So if you see one of these big box outfits disappoint, remember that this could be the last really competitive quarter.
After that, the small guys? Mostly done through no fault of their own, except a disease that no one ever predicted and a Congress and a president that can't get the job done that would save these businesses until the much awaited vaccine finally arrives.
(Amazon, Costco and Starbucks are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)
