Jim Cramer: Ross Stores Looks Good, but Beware 'Off-Price Saturation'

NEW YORK (TheStreet) -- With retail sales heading down and online competition heading ever higher, discounters like Ross Stores (ROST) are still worth keeping an eye on, TheStreet's Jim Cramer said Friday on CNBC's "Cramer's Stop Trading" segment.

Ross released its first-quarter earnings after the bell Thursday. Its net income was $282.2 million, or $1.37 per share, beating analysts' $1.28 EPS estimates. Revenue came in at $2.94 billion, better than the $2.89 billion consensus prediction.

ROST Chart

ROST data by YCharts

But while Cramer thinks Ross Stores did a good job, he's concerned about its prospects. "People are beginning to talk about the saturation of 'off-price,'" Cramer said.

Chains like Macy's (M) are moving into discounting. Higher-quality merchandise is appearing on the shelves of low-end retailers, and e-commerce is cannibalizing everyone. It's possible that there are too many chains chasing after the same discount customers.

For Cramer, a telling economic indicator for the trend was right under his nose -- literally.

"Yesterday, David, you don't realize [that on the show] I wore a tie from The Rack -- 29 bucks," he said. "You thought it was an Hermes tie -- it was from The Rack. You didn't even know the difference!"

No, Cramer doesn't buy his own ties. He admitted his wife picked it up for him at Nordstrom's (JWN) discount chain -- and she did it online, supporting the other half of his assertion. Between the bricks-and-mortar arena and the online arena, everyone in retail is pushing prices down. That could spell trouble for chains that have long made their home in the rapidly saturating discount space.

At the time of publication, Cramer's Action Alerts PLUS held no positions in the stocks mentioned.

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