Be selective about retail stocks in this economic environment

CNBC’s Jim Cramer reviews this week’s earnings. home depot, lowe’s, TJX, target and walmartsuggests that reports from major retailers have been mixed so far this season.

“While we’re all preoccupied with the consumer situation, this didn’t seem like a great week for retail until the lights went out at Walmart this morning,” he said. “Right now, know that you need to be cautious when picking retail stocks in this environment. There aren’t many stocks that are doing well.”

Mr. Kramer was less impressed with the performance of home improvement retailers Home Depot and Lowe’s, although he said the latter’s performance was relatively better than the former. Home Depot’s earnings were weaker than expected, and the company cut its full-year outlook, citing slowing consumer spending and a weak housing market. Cramer argued that Home Depot remains a good stock to own because it will be a big beneficiary of interest rate cuts by the Federal Reserve. Kramer noted that Lowe’s managed to outperform its top and bottom lines even in an uncertain economic environment. Although the company slightly lowered its full-year profit forecast, it also raised its full-year sales forecast.

Cramer continued that Target’s quarter disappointed Wall Street, as it reported missed sales and lowered the high end of its earnings outlook. He noted that the company’s traffic has declined and management has reported “continued weakness across the broader discretionary portfolio.” Meanwhile, the target peer walmart The company beat expectations and raised its full-year forecast as the major retailer succeeded in attracting more shoppers across a variety of income levels.

TJX, which owns brands such as TJ Maxx, Marshalls and HomeGoods, had a strong quarter, Cramer said. He suggested that off-price chains “have a different strategy than regular retailers” because they buy surplus goods cheaply from other companies. That’s why it’s thriving even when the industry as a whole is having trouble moving goods.

“In stark contrast to Target, the company saw improvement in both the number of trades and average trade value,” Cramer said of TJX.

Subscribe to CNBC Investing Club today to follow Jim Cramer’s every move in the markets.

Disclaimer CNBC Investing Club owns stock in Home Depot and TJX.