The life cycle of a publicly traded retailer has taken on a grueling quality, courtesy of the need to demonstrate growth. Take Restoration Hardware (RSTO) . I remember the day it went public: I was on "Squawk," and the executive was speaking about how he was going to expand, expand and then expand some more. That had been the way to get Wall Street's love, and with a business plan that seemed like money in the bank, who can blame the folks from Restoration Hardware for trying?
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Message Boards. Of course, the plans fouled up, I mean, who could really execute perfect growth from little guy to national retailer in the time Wall Street wants without giant hiccups? And now the stock dwells at 7, looking like something well, in bad need of restoration.
Or how about
, another rapid grower that went public in 1995? It roared out of the chute and a year later announced the first of a string of earnings disappointments as it couldn't maintain the pace. (Its history of quarterly excuses reads like Job, with fire and flood and just about every natural calamity that could befall an enterprise.)
Management just decided last month to take the company private, at $11.50 a share, a phenomenally negative return over its four-year public tenure.
I think these companies stumble because they can't live up to the pressure to have the organic growth that pleases analysts. We have seen this cycle occur over and over again with retail, to the point to where it is painful to speak with the execs of the young companies because you don't want to let them know how it all ends.
That's why I was gratified to learn, when I pulled up with Gordon Segal, the top man at
Crate and Barrel
, which is happily private, that Segal thinks going public may be the dumbest thing a retailer can do.
Segal, who chatted in the green room with
and me, recounted how the ups and downs of retail simply aren't made for Wall Street. Nobody, he says, could execute under the timetable that would please the Street without flubbing it. And Segal is one of the greatest operators who have ever lived. His stores are dazzling, quirky and fun to go to.
So what is a publicly traded retailer to do? After the shellacking this group has taken from the dot-com retailers, it would not surprise me one bit if more retailers followed the management path that Garden Ridge is taking. What good are the capital markets if they value your efforts less than what they are worth and put impossible schedules in place for you?
Don't get me wrong. Retail can be a great business when you get it right. Look at
. But don't look much further. It's pretty crummy out there, even in the best of times.
And I don't look for it to improve anytime soon.
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