Smarter Money

Return to Article

Retailers Feast on Wounded Wal-Mart

Jim Cramer

Editor's note: This is a bonus story from James Cramer, whose commentary usually appears only on RealMoney. We're offering it today to TheStreet.com readers. To read Jim's commentary every day, please click here for information about a free trial to RealMoney.

They're going aisle by aisle now, the opponents of Wal-Mart(WMT Quote - Cramer on WMT - Stock Picks), feasting off the wounded mass merchant, going after it with special deals, more selection, better help and a sense of mission.

That's what we saw from Michaels Stores(MIK Quote - Cramer on MIK - Stock Picks) last night, another terrific quarter from the craft king. You want yarn, you go there. You want stuff to paint, you go there. You want anything you need to make something else, Michaels has it. Wal-Mart doesn't; it just doesn't have the selection. In an era when rich grandparents don't want to buy their grandkids X-rated video games about violence and mayhem and grand theft, a trip to Michaels is always in order.

Michaels is in the top 10 places I see people going to instead of Wal-Mart these days, and I am not talking facetiously here, as when I recommended the swap of Wal-Mart for Soviet Trade House GUM, symbol comes out GUMRY, the old Communist version of Macy's. Michaels is one of those places that recognizes that people don't want three aisles of low-priced goods; they want 20 aisles to chose from. And just in case you don't believe me, take a look at Wal-Mart's downscale analogue, Dollar General(DG Quote - Cramer on DG - Stock Picks), off two smackers on another bad quarter.

Where else do shoppers want to go?

Wal-Mart may be the largest seller of CDs in the country, but with Apple(AAPL Quote - Cramer on AAPL - Stock Picks) climbing back over $40, it might be good to remember that iTunes is the way the next generation buys music. Don't I know it; why is my daughter babysitting every moment she can these days? She says she's getting 25 songs when she does!

Online? How about Wal-Mart white-flagging video rentals and throwing in its lot with Netflix(NFLX Quote - Cramer on NFLX - Stock Picks)? I say forget about it, Comcast(CMCSA Quote - Cramer on CMCSA - Stock Picks) just came out with numbers showing that video on demand is up about tenfold in the last year. That's the ultimate winner for video. Amazon's(AMZN Quote - Cramer on AMZN - Stock Picks) got the bases covered for everything else.

Sporting goods? Did you see the number from Dick's(DKS Quote - Cramer on DKS - Stock Picks) the other day? You can't tell me that's not coming out of Wal-Mart's hide. Higher-end goods, more selection: that's the Wal-Mart Death Star writ large!

Bulk retailers: Having just gotten off the Costco(COST Quote - Cramer on COST - Stock Picks) call, I can tell you that this destination store is going to get a lot bigger in the next year, as the parcels of land where it can build at last get freed up. It's pretty clear that Costco owns the higher end of the bulk business, which is the growth end, I might add.

Hardware, lawn and garden? You have to be thinking either Lowe's(LOW Quote - Cramer on LOW - Stock Picks) or Home Depot(HD Quote - Cramer on HD - Stock Picks); either one is taking it to Wal-Mart. I like Lowe's more because more growth is ahead of it, but there's nothing shabby about that billion-dollar buyback we just got from Home Depot. Don't forget a rejuvenated Sears(SHLD Quote - Cramer on SHLD - Stock Picks) for appliances and tools!

Home decor and bedding are going the way of Bed Bath & Beyond(BBBY Quote - Cramer on BBBY - Stock Picks). Here's a stock that looks like it is recharging and getting ready to go. Again, selection and pricing are key, and Bed Bath & Beyond has those all over Wal-Mart.

You want groceries with the Wal-Mart seal of approval, whatever that is? Or do you want Whole Foods'(WFMI Quote - Cramer on WFMI - Stock Picks) seal of approval? Do you want Sam's products, or Whole Foods'? Enough said, and Whole Foods is just going to get bigger and bigger.

Consumer electronics is a hands-on business these days with big tickets and installation help. That's Best Buy's(BBY Quote - Cramer on BBY - Stock Picks) stock in trade. I don't see Wal-Mart taking back that world, and just a few years ago, people thought Best Buy would be driven out of business by Wal-Mart. Not so fast!

Finally, there's a business -- video games -- that, after the downfall of Toys R Us, we thought was going to default to the company that allegedly murdered TOY: Wal-Mart. Nope. That video-game business is going to Electronic Boutique(ELBO Quote - Cramer on ELBO - Stock Picks)-GameStop(GME Quote - Cramer on GME - Stock Picks), the newest category-killer out there.

All of these categories that were once ceded to Wal-Mart are being taken back, and I would buy any of those stores over Wal-Mart.

Oh, throw in an added bonus: Target's(TGT Quote - Cramer on TGT - Stock Picks) got whatever broad lines covered that Wal-Mart doesn't, and, you don't feel like you just were bored to death when you shopped there.

Random musings: I have to wonder when someone's going to raise numbers for News Corp.(NWS Quote - Cramer on NWS - Stock Picks) after that American Idol sweep. Too bad about the Liberty(L Quote - Cramer on L - Stock Picks) overhang. I believe this stock would trade up right now if it weren't for that.