360 Degrees of Retail

Editor's note: In this edition of "360 Degrees," Jim Cramer, Steve Smith, Cody Willard, Rev Shark, Marc Lichtenfeld, Robert Marcin, Richard Suttmeier and Michael Comeau discuss the implications of the latest retail same-store-sales reports.

TheStreet.com has always believed that offering a wide variety of opinions and viewpoints -- rather than a monolithic "house view" -- helps readers make better-informed investment decisions. In that spirit, we bring you "360 Degrees," a feature that takes advantage of our varied stable of RealMoney contributors, who offer analysis of stocks and the markets from all angles.

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Don't Overthink Retail
By Jim Cramer
5/10/2007 9:57 AM EDT

Retail: Don't overthink it.

We know that Costco (COST Quote), Walgreen (WAG Quote), Family Dollar (FDO Quote), Target (TGT Quote) and TJX (TJX Quote) were all on plan. They are all heavily shorted. Go after them now.

And if you want to, take some Saks (SKS Quote), although that one's tougher because it hasn't come down at all. It's too good.

Right now, you need to start buying the calls on J.C. Penney (JCP Quote), Kohl's (KSS Quote) and Federated (FD Quote), betting that "worse than expected" was simply "as expected."

All of this is happening, and the reason I'm not advocating selling is that once again, the sales have been made, but the covering hasn't begun. These companies are way too low, so low even that I would have to commit something right now to the group.

Better to go after the ones where numbers don't have to go down, the ones I delineated up top, and then buy calls on the rest.

Oh, one more thing: My sources indicate that people are way too worried about Sears' (SHLD Quote) April. Think bigger than a month, my sources say. I agree.

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

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Chilly Season for Retail
By Steven Smith
5/10/2007 8:03 AM EDT

Monthly same-store sales for April are coming in generally lower than expected, as unseasonably cold weather hurt retailers' sales. Weather is usually the default excuse for disappointing retail results, but this year, in the form of a warm January and a frigid April, it has wreaked havoc on apparel chains. That said, the bears will certainly point to this as evidence of a slowdown in consumer spending.

I'm going to use today's results to see which companies best managed their inventories and to find out which ones might be good buying opportunities.

The first candidates that come to mind are those focused on teen apparel. American Eagle's (AEO Quote) same-store sales fell 10%, well below the expected 1.3% increase. This chain had been on a tear, and I believe the latest month could be a true anomaly, not a sign that its days of being the fashion of choice are past. If the stock trades down toward $27, I'd look at buying some August $25 calls at around $4 per contract.