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Cramer's 'Mad Money' Recap: Retail Conundrum

Cramer says consumer spending is surprisingly healthy despite rising unemployment and foreclosures.
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) -- How can unemployment and home foreclosures continue to rise while consumers are spending more at high-end shops and restaurants?

That's the question Jim Cramer posed on his "Mad Money" TV show Thursday.

Cramer said companies are still not hiring while foreclosures are moving along at a record pace. Yet the earnings at high-end retailers, like



, and at pricier restaurants like


(DRI) - Get Free Report


Cheesecake Factory

(CAKE) - Get Free Report

are up, he noted.

In addition, he said earnings guidance was slashed at

Jack in the Box

(JACK) - Get Free Report

, while raised at

Whole Foods



According to Cramer, banks too, also confirm this odd trend in their reporting that defaults on credit cards and auto loans are on the decline, while home foreclosures are on the rise.

Cramer said the reason for all of this may be simple. Consumers may not be able to save their homes or jobs, he said, but they're still going out and living their lives. Perhaps, he said, they're defaulting on the homes in order to save their cars and way of life, he theorized. Nearly two-thirds of the U.S. economy is driven by consumers, said Cramer, and that the economy just keeps on expanding.

Defying the Odds

In the "Executive Decision" segment, Cramer spoke with Lew Frankfort, chairman CEO of high-end retailer



, to see how that company is defying the odds and posting gains amidst the recession.

Frankfort said it's hard to know what motivates the Wall Street analysts, who are skeptical on Coach's outlook, but he cited Coach's return to double-digit growth last quarter, and is seeing a strong January and February.

Frankfort attributed his company's growth to its ability to adapt to the changing market conditions by introducing new products more often, and rebalancing its price points to offer some items at 15% less than before. He said the American consumer is still spending, and is spending more this year than they did last year.

Frankfort was also optimistic on Coach's prospects in China, where a growing middle class is increasingly enjoying the company's products. Frankfort noted that there are 125 cities in China with a population of one million people or more that can supprot at least one Coach location. He called the opportunities in China "unlimited."

Cramer called Coach a fabulous retailer, and said that the company is undervalued at current levels.

Second-Half Recovery

In a second interview, Cramer spoke with David Steiner, CEO of

Waste Management

(WM) - Get Free Report

, for another take on the health of the U.S. economy.

Steiner said all signs are pointing to a recovery in the second half of 2010. He said in a business that's split evenly between residential pickup, commercial pickup and landfill operations, the recession proof nature of its residential operations has been crucial to their success.

Regarding the record breaking winter weather in the Northeast and Mid-Atlantic regions of the country, Steiner said it will likely have an impact on the company's earnings, which will likely be two cents a share based on 2003's winter data.

Steiner also mentioned that Waste Management's waste-to-energy operations is another bright spot for the company. He said Waste Management realized a few years ago that the materials they collect, which traditionally would all be discarded, actually is worth between $8 to $10 billion a year. As a result, the company is working hard to recycle, reuse and convert into energy, all it can.

In closing, Steiner said he will continue the company's strategy of providing a meaningful dividend to shareholders and continuing its stock repurchase program.

Credit Card Delight

What other stocks are on Cramer's radar? He said it's


(V) - Get Free Report

, which just reported a better-than- expected quarter, beating by eight cents a share while raising its guidance.

Cramer said Visa isn't involved with consumers not paying their credit card bills, but rather the company just runs its processing network and collects its fees. Visa dominates the market with a 54% market share in global-purchase volumes.

According to Cramer, Visa not only benefits from the cyclical worldwide recovery, but also from the secular trend of consumers around the world switching from money to debit-card payments.

Pulse of the Market

In this segment, Cramer said that drugmaker


(PFE) - Get Free Report

is the most disappointing of all the drug companies, and anyone hoping for a recovery in


(DELL) - Get Free Report

is just wishful thinking.

Cramer said the stocks of

Freddie Mac



Fannie Mae




(AIG) - Get Free Report

are simply worthless.

However he said

Skyworks Solutions

(SWKS) - Get Free Report



(AAPL) - Get Free Report

, a stock which he owns for his charitable trust,

Action Alerts PLUS, are two worth owning.

-- Written by Scott Rutt in Washington D.C.

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At the time of publication, Cramer was long Apple.

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