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Cramer's retail ranking: Stores that can survive Amazon

Abigail Stevenson
Cramer's retail ranking: Stores that can survive Amazon

While the world has worried about the implications of a Brexit , Jim Cramer has been watching the pulverization of retail.

Since peaking last year, Kohl's (NYSE: KSS), Macy's (NYSE: M), Nordstrom (NYSE: JWN) and Dillard's (NYSE: DDS) are all down more than 50 percent.

The only exceptions were the ones that were already in free fall for years, such as J.C. Penny (NYSE: JCP) and Sears (NASDAQ: SHLD).

"Things have gotten so bad for this cohort that we need to start asking ourselves which of them have what it takes to survive this ultra-hostile environment," the "Mad Money" host said.

Cramer analyzed each company for its ability to withstand the popularity of Amazon (NASDAQ: AMZN), and the decline of the shopping mall.

From the perspective of sales, Cramer rated Nordstrom as No. 1, followed by J.C. Penney, Kohl's, Dillard's and then Macy's. Last place went to Sears, which posted a 6.1 percent drop in same-store sales last quarter.

The next category was survivability, which Cramer determined through the lens of how badly earnings have been damaged. J.C. Penney was the clear winner as the only department store that has been moving in the right direction. Even though it has been losing money for years, the losses have been shrinking consistently as margins expand.

Every other store was moving in the wrong direction, with some moving faster than others. The next to rank for survivability was Macy's, Dillard's, Kohl's, Nordstrom and Sears.

Cramer also analyzed each company's balance sheets. Dillard's came in first place for the best balance sheet simply because of its light debt load.

"In terms of the company's actual survival, that means Dillard's is safe," Cramer said.

Macy's came in third, followed by Kohl's, J.C. Penney and Sears, which will likely need to continue to sell assets to pay its debts.

The final category was strategic flexibility and the ability to resist Amazon. The top contender for that was Nordstrom, because it was one of the first to embrace the internet. Though, it has spent $6 billion on its Omni channel business and is still just trying to keep up with Amazon.

Second place went to J.C. Penney and the Savvy moves of its CEO Marvin Ellison, followed by Kohl's, Macy's, Dillard's and again the last was Sears.

"While I would stay away from all the department stores here, from a pure survivability perspective, Nordstrom is the most safe, followed by J.C. Penney, then Dillard's and Kohl's tied for fourth and the awful Sears Holdings coming in dead last," Cramer said.

At a moment when retail is finally starting to turn around, Cramer recommended that the stronger plays are worth a long trade, and those stuck in a bad stock could have a chance to sell it into strength soon.

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