Cramer On Macy's: Consumers Are Spending Their Money Elsewhere

Macy's Inc M reported second-quarter results that sent shares tumbling to a new multi-year low, but there's no reason to believe this is indicative of a looming recession, according to Jim Cramer.

What Happened

Macy's earned 28 cents a share, which fell short of expectations by 17 cents per share. The miss was so large Cramer said during Wednesday's "Mad Money" show he thought there was a "misprint."

The company attributed part of its poor performance to heightened inventory and few tourists spending money at its flagship New York City store, Cramer said. The conference call was "grim" as management expressed concerns over tariffs.

Cramer said there were two positive takeaways from the report, including "excellent" performance in the beauty and wellness business and "very strong" growth in online sales.

Why It's Important

Looking at Macy's performance, one may not be faulted for assuming it's foreshadowing a retail meltdown and an economic slowdown, Cramer said. Macy's and its rival mall-based peers aren't necessarily a victim of consumers spending less, rather a victim of consumers spending their money elsewhere.

"Rather than buying clothes directly from Macy's, the consumer waits for them to offload their excess inventory to TJX or Burlington Stores at a huge discount and then picks up the same stuff for a fraction of the price," Cramer said. "So yeah, the Macy's conference call was brutal, but I think that's less about the state of the consumer and more about the state of the mall-based department store."

Macy's stock now offers a 9% dividend yield and a payout this large is typically greeted with investor skepticism over the company's ability to pay shareholders moving forward, Cramer said. However, the balance sheet is now the "best it has been in years" and management's downward revision to its full year numbers wasn't that notable.

Macy's stock traded around $16.81 per share at time of publication.

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