Restaurants, Retailers Are Too Hard to Own

Retail and restaurants have become intertwined so closely with housing that I have to wonder whether things are getting absurd.

This morning the analyst at Morgan Stanley took Brinker (EAT - commentary - Cramer's Take) to underweight, which is to say, a sell. The research note said there really isn't anything more that Brinker can do to bring out value, having exhausted all of the financial engineering possible, including refranchising and leveraged recapping. It's a devastating indictment of those who are betting that the restaurant game can continue to be privately equitized.

The collapse of Sonic (SONC - commentary - Cramer's Take) and Cracker Barrel, which have been among the most aggressively repurchased stocks, shows that the Morgan note may be on to something.

Yum! (YUM - commentary - Cramer's Take) can go higher but that's demand from China. McDonald's (MCD - commentary - Cramer's Take) has nice international business; Wendy's (WEN - commentary - Cramer's Take) is quitting.

Only the big-growth restaurateurs -- because they have a small base -- can move up for long: Buffalo Wild Wings (BWLD - commentary - Cramer's Take) and Chipotle (CMG - commentary - Cramer's Take) are the best examples. (I still like Cheesecake Factory (CAKE - commentary - Cramer's Take) as a leveraged buyout candidate, but this Brinker note gives me pause.)

Meanwhile, unless you catch a takeover bid in big retail, there's nothing there but sellers. We got a run-up in Macy's (M - commentary - Cramer's Take) last week and in Sears (SHLD - commentary - Cramer's Take) on the idea that they could be doing something big, but nothing's happening.

Goldman upgrades Home Depot (HD - commentary - Cramer's Take) but the stock goes down. Best Buy (BBY - commentary - Cramer's Take) announces a gigantic buyback and the needle moves for a couple of points -- and then settles back into the negative groove.

Ann Taylor (ANN - commentary - Cramer's Take), which had been ramping, is giving up its post-quarter rally. Sears is right back down. J.C. Penney (JCP - commentary - Cramer's Take) and Kohl's (KSS - commentary - Cramer's Take) can rally for a couple of minutes and then get hammered. Only Saks (SKS - commentary - Cramer's Take) seems to be able to keep its head above water, and that's all because of high-end scarcity.

I think this group is being oversold, but I also think that Morgan's Brinker piece will keep the pressure on the group, particularly because the next leg down might be a story about how electric bills are going to eat into the consumer's pocketbook.

Incredible how these two groups plus banks and homebuilders have all been totally trashed off the endless negative news stories about subprime. I am a big believer in the "fashion" show of Wall Street; these stocks have become bell-bottoms and nehru jackets. They are simply too hard to own right now. Even the best ones are just good houses in terrible neighborhoods.

At the time of publication, Cramer was long Sears Holdings and Goldman Sachs.

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