Jim Cramer: Retailers must 'fully commit to off-price or online' to win

"Everything else is in trouble, especially in this post-coronavirus world where things are getting a whole lot tougher for the whole industry," the "Mad Money" host said.

CNBC’s Jim Cramer on Thursday broke down the quarterly reports for Burlington Stores and Kohl’s department chains, doubling down on his investment thesis about the retail sector.

“You need to be off-price or online” to win in retail, the “Mad Money” host said. “Everything else is in trouble, especially in this post-coronavirus world where things are getting a whole lot tougher for the whole industry.”

The assessment remains largely intact with Cramer’s outlook for the retail landscape that is evolving from bricks to clicks. Investors, he argues, should put their money behind retailers that have robust e-commerce or discount sales strategies. Big-box and discount retailers are reporting sales growth, while stores connected to shopping malls have struggled to expand their revenues.

“If you want to succeed in retail, you need to fully commit to off-price or online. Everything else is going to have a much harder time in general, especially in the middle of a possible pandemic,” he reiterated. “And remember: it has more to do with the buyers not wanting these stocks than it does necessarily with how the companies are doing.”

Burlington Stores is a traditional brick-and-mortar store that can perform in this environment, as it showed in its fourth-quarter report. The off-price department chain said same-store sales improved 3.9%, topping estimates of 2.9%. Revenue was up more than 10% in the January quarter.

The stock was up 3.8% at its intraday highs, though it gave up most of those gains to finish the session up 0.41% at $220.28 per share. Shares are down about 3% this year, but are up 31% from a year ago.

“That’s a major beat. Throw on some margin expansion and a promise for more down the road, then you know Burlington’s got a bright future, even if the next few months might be difficult for the whole industry,” Cramer said. “It’s a buy.”

Kohl’s, he suggested, is facing challenges similar to those of Macy’s. They are both traditional full-price department chains lacking a strong online business to compete with the likes of Target and Walmart, he said. During the holiday shopping season in December, Cramer said department stores offering lackluster incentives to draw customers into their establishments “have never felt more irrelevant” and are facing more pressure in the space.

Earlier this week, Kohl’s reported that both comp sales and revenue were relatively flat in the fourth quarter, although the company did beat on the top and bottom lines in its January quarter. Kohl’s stock has lost more than half its value in the past year.

“At these levels, the darned thing sports an 8.25% yield,” Cramer said. “Typically, that would signal that the payout may be in danger.”

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