“You go to TJX because you don’t want to pay the Nordstrom price. You go to Coach because you do. So who’s right? Which stocks are right? Normally you would buy one and sell the other. Either go with the high end or the low end. But in this bull market both are this is a real conundrum. These stocks are just acting too strange to really fathom. And it’s not just because like Alcoa just reported the first good quarter ever and that’s no. I’m saying in my 30-year career of picking stocks it has never all worked at once. We’re either supposed to be shopping at Nordstrom’s or schlepping to Family Dollar. We’re supposed to be buying either generic brands, slumming with them I should say, or high-styling with premium it shouldn’t be happening at the same time…

I puzzle over it daily. Maybe the rich are back spending again, which would explain the runs in Tiffany’s, Coach, Ralph Lauren, and Nordstrom, while the middle class is trading down by staying at home and the poor are just Family Dollaring it.” — CNBC’s Mad Money 10/7/2009

The current environment in retail is leaving Cramer in a lurch, as he cannot recall a time when both high-end and low-end retail stores were performing so well.  He points to the recent performance of “trade-down” retailers like TJX Companies (TJX) and Family Dollar (FDO).  They both are reporting stronger sales numbers than analysts expected, but TJX stock has performed much better recently and is approaching 52-week highs.  Normally, this would signal to Cramer that consumers are trying to stretch their dollars by buying knock-offs or discounted merchandise.

At the same time, sales have been steadily improving at the higher end of retail as well, and the stocks of Nordstrom (JWN), Coach (COH), and Tiffany’s (TIF) are all trading nearly their 52-week highs as well.  The implication is that consumers are willing to open their wallets for the finer things in life, which would be a major shift in consumer behavior from the past year or more.

Even though all of these companies are in the retail sector, they normally do not trade in a similar fashion because of they cater to different consumers.  The two trade-down namesMad-Money_10-7 have a beta of less than one, which means they are less correlated to the direction of the market and may perform better when the market struggles.  Whereas the higher-end retailers have a beta coefficient of more than 1, and they generally perform better as the market is moving upwards.

The old saying “a rising tide lifts all boats” seems to be appropriate in this circumstance, and this morning’s release of retail sales were in general better than expected across the board.  However, that does not mean that investors should just buy any and all retail stocks based on their recent performance.  Cramer recommends, and we agree, that investors wait for a pull back in these stocks.  They have become fairly expensive in recent months, and a pull back would allow for a much more attractive entry point.

For a full recap of Mad Money, please visit the Mad Money show page.  Also, see the chart to the right for a listing of other stocks discussed on Cramer’s show.

Cramer Scratching His Head over Retail