Sore About ConStores

After reading your feedback on the company and its Kaybee unit, the trader is more convinced than ever that the stock is not for him.
Author:
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Nobody's buying this

Consolidated Stores

(CNS) - Get Report

explanation. Not at all. Not one bit. I have read all of your letters, some of which are being published and some of which can't be published because the writers asked that they not be published.

First, just so we are on the same page, ConStores blamed its miserable preannouncement on two main problems: freight costs and a pause in the video game market. The weakness, it seemed, was centered on

KayBee Toys

.

Sure enough, there are some surcharges involving higher oil costs that may have played some havoc with goods delivered from the Far East. And a small portion of the video game market has some weakness related to upcoming product rollouts from

Sega

.

But neither the KayBee shoppers nor the ConStores shareholders are buying it. There were two explanations that rang true to me. One is that KayBee is getting its clock cleaned by

Wal-Mart

(WMT) - Get Report

and even

Toys R Us

(TOY)

. I didn't read a single letter which said it was fun or interesting or cheaper to shop at KayBee than anywhere else. We are talking about toy shopping; you have to enjoy it or get the best price. One or the other. Not neither.

The second is that there are other problems at other divisions of ConStores that may also be in trouble, and the company tried to minimize them by focusing on KayBee, a recently acquired division. I particularly liked this message I got from several readers, that ConStores' close-out division doesn't have any great merchandise or customer demand because of the strong economy. Historically, ConStores buys merchandise from distressed merchants, but those are few and far between, because even the worst retailers are staying afloat in this business environment. So there is nothing of extraordinary value to sell. And because so many people have good jobs, and good jobs are so attainable, people are trading up out of ConStores and into places like Wal-Mart. A strong economy spells bad news for this investment.

But let's cut to the chase. Do I want to use this price break to buy CNS?

Nope. The problems here seem more structural and deep than just video games and freight surcharges. I would rather own this disappointing dog when the economy is weaker and its best work, liquidation sales, comes more into play. In the meantime, after reading your feedback, I am not attracted to it even at these greatly reduced levels.

James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund had no positions in any stocks mentioned. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at

jjcletters@thestreet.com.