Jim Cramer, host of Mad Money, recently took a close look at market trends and explained why many stocks are continuing to struggle, specifically in sectors like consumer goods. Cramer pointed out that the ongoing bear market is showing no signs of easing, with stock prices persistently declining day after day.
While Cramer acknowledged that inflation remains a concern, with the Federal Reserve continuing to highlight the issue, he encouraged investors to keep in mind the underperformance of these key sectors.
“This is a market that rewards growth regardless of price. So, people will pay up for tech growth, which is all about real demand and pricing power, and they’re avoiding companies that have lost pricing power and offer yields that are too low to compete with Treasurys. I don’t expect that dynamic to change any time soon.”
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“They spent last year hurting the market and this year already many are in the red. It’s not just a continuation people, it’s actually an acceleration.”
He also highlighted that while tech stocks related to artificial intelligence and advanced computing have helped prop up the market, many other sectors have been facing significant challenges. Cramer singled out industries such as real estate, healthcare, housing, biotech, materials, and food, sectors that underperformed dramatically last year and are showing similar weaknesses this year.
“Bottom line: When you look at these super underperforming stocks, all I can say is, maybe the Fed had better be careful for what it wishes for. Companies that represent a gigantic chunk of the real economy have seen their stocks swoon. Could their earnings be that far behind, and could inflation be running its course a lot faster than expected?”
7 Consumer Goods and Retail Stocks on Jim Cramer’s Radar
Our Methodology
For this article, we compiled a list of 7 stocks that were discussed by Jim Cramer during the episode of Mad Money on January 6. We listed the stocks in the order that Cramer mentioned them. We also provided hedge fund sentiment for each stock as of the third quarter of 2024, which was taken from Insider Monkey’s database of 900 hedge funds.
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7 Consumer Goods and Retail Stocks on Jim Cramer’s Radar
7. Target Corporation (NYSE:TGT)
Number of Hedge Fund Holders: 49
Cramer talked about Target Corporation (NYSE:TGT) during Mad Money and here’s what the host had to say:
“Now it is true that profitability may be pinching some of these retailers, Walgreens, Dollar General, Dollar Tree, Target, all of which sell these goods and they’ve all seen their stocks just get crushed.”
Target (NYSE:TGT), a leading retail chain, has built its reputation by blending digital shopping convenience with an enjoyable in-store experience. However, the company has recently faced challenges that have impacted its performance. The ongoing inflationary pressures have led consumers to reduce discretionary spending, which has particularly affected retailers like Target, known for offering trendy and upscale products. Over the past year, the stock is up less than 1%.
The shift in consumer behavior has made it more difficult for the company to maintain strong sales, especially when compared to its competitors, such as Walmart, which benefits from its more substantial focus on essential products. According to The Wall Street Journal, the company’s sales have struggled as it faces a volatile operating environment. It has resulted in lower comparable sales growth, which tracks spending in both existing stores and online.
Target’s (NYSE:TGT) comparable sales growth has been behind Walmart’s for 11 consecutive quarters, a concerning trend that highlights the difficulties Target faces in the current retail climate. An issue for the company is how to capture market share when consumers are increasingly focused on essentials rather than discretionary purchases like those typically offered by Target.
As Jerry Storch, a former Target executive, pointed out, the company has long been an upscale retailer centered around discretionary items. Although it introduced grocery offerings to diversify its product range, it has not been able to protect sales of higher-margin specialty items as effectively as hoped.
6. Dollar Tree, Inc. (NASDAQ:DLTR)
Number of Hedge Fund Holders: 40
Cramer discussed how companies like Dollar Tree, Inc. (NASDAQ:DLTR) are seeing their profitability hurt and their stocks nosedive.
“Now it is true that profitability may be pinching some of these retailers, Walgreens, Dollar General, Dollar Tree, Target, all of which sell these goods and they’ve all seen their stocks just get crushed.”
Dollar Tree (NASDAQ:DLTR) operates discount retail stores, with its Dollar Tree segment known for offering a fixed pricing model where items are sold for $1.25. As shoppers increasingly seek value, dollar stores appear to be a natural destination for those looking to save. However, this cost-conscious trend has not been enough to significantly boost sales for Dollar Tree, and the company has faced notable challenges in recent times.
Shares of the company have dropped considerably over the past 12 months, down more than 45%, compounded by leadership changes within the company. In response to these difficulties, it has been adjusting its approach by introducing new price points and revamping store formats to stay competitive. Management has noted that the fourth quarter started slower, partly due to factors like the election and the later-than-usual timing of Thanksgiving.
According to CNBC, retail analyst Peter Keith of Piper Sandler highlighted several challenges for companies like Dollar Tree (NASDAQ:DLTR), including its dependence on lower-income customers who are more affected by inflation. The company’s operating model, with minimal staffing and low wages, has led to disorganized aisles and a negative customer experience. The company is facing mounting pressure due to increased competition, especially from Walmart’s heavy investment in e-commerce.
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