Retailers' Tactics Don't Make Any Sense

Lowe's (LOW - commentary - Cramer's Take) disappoints, not just because of the guidance, but because they still insist on putting up more stores. WHY? WHY? WHY?

The solution of all of these retailers seems to grow their way out of their jams. They just keep putting up more stores in the worst market in the world: the United States. There's no rhyme or reason to this penetration, even though Lowe's says it is important to have more stores in each region to capture more business. They say this even though they admit that things are so bad that they have to go back to the '70s to find a moment when there were more headwinds.

They are simply playing by the playbook since then, which is to not pull back at all, but to keep building because things eventually turn down. Lowe's does admit to dialing back some of the expansion, but it isn't much of a building slowdown if you ask me, particularly because of the rollback of prices because of competition EVERYWHERE. They are being too bullish comparing this to the 1970s. That's too rosy. If you disagree with me, ask the bankers who are in this business. They aren't nearly as positive at Lowe's or any other retailer I know of, for that matter. Yet, they keep building.

To which, again, I ask WHY? There isn't enough business to go around now.

The hope in the retail business is that the weaker players fold. That's fine, but we haven't seen it yet. Even the worst ones, such at the LBO of Linens 'n Things, just won't quit. There are just few signs of companies going belly-up in retail, and when they do -- Sharper Image (SHRP - commentary - Cramer's Take)? -- they still don't just shut down, they just drag themselves on. I guess if you are selling leather, you can cheer that Wilsons (WLSN - commentary - Cramer's Take) went down, but have they really gone down, or is this just another endless drag out of a problem retailer?

Lowe's isn't going to buy any more stock here, just build more stores. If they really thought their stock was cheap, they would be buying back more stock and putting up fewer than the 120 new stores they want to throw up.

There's no sense to the endless building of stores. None. It isn't working. It's just making things tougher. It's just making everyone make less money.

This building rationale is simple: "Things have to get better."

I don't see it. But then again I have been bearish and right; these guys have all been bearish and wrong.

At the time of publication, Cramer had no positions in the stocks mentioned.

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