Retail For Sale… And Lingering Problems For Commercial Real Estate 3/19/24

0:01Live from the Nasdaq market site in the heart of New York City's Times Square. This is fast money. Here's what's on tap. Steals and deals in retail from go private talks at Nordstrom to opening the books at Macy's to a T-shirt giant possibly up for sale. We'll talk matchmaking and the state of the consumer coming up. Plus, dip and rip. Shares of Nvidia starting the day deep in the red before rebounding. This the day after announcing its new Blackwell AI chips in front of a packed house. We'll break down the semi-trade from here. And later, Bitcoin's bad week. What is behind the crypto crumble?

0:31a bounce back for the builders inside today's strong housing data and emojis, what they can tell you about how retail investors are feeling right now. We will explain. I'm Melissa Lee coming to you live from Studio B at the NASDAQ. On the desk tonight, Steve Grasso, Karen Feinerman, Dan Nathan and Guy Adami. Markets staging a turnaround late in the day with all three indices ending squarely in the green. The S &P rising six-tenths of a percent, setting a new record close. The Dow adding 320 points in the NASDAQ, down nearly a percent at its lows, finishing the day up four-tenths of a percent. We'll get to that in just a minute.

1:02But first, new signs that the retail sector is ripe for some deal-making. Shares of Nordstrom popping more than 9 % after reports that its founding family is looking to take the company private. This news coming after similar attempts six years ago was ultimately unsuccessful. But it's far from the only deal percolating in this consumer space. Macy's saying it has agreed to open its books to potential acquirers, Arkhouse and Brigade Capital. Both it and Kohl's have attracted activists' interest in recent weeks. There's also Tapestry's$8.5 billion deal for Capri, which is expected to close later this year.

1:34And just this afternoon, shares of American apparel giant Gildan Activewear popped after the board said it has several potential buyers for the company. So is this just the start of a coming wave of M &A activity in the retail space? Karen, what do you think? Well, it's very surprising. It's a ton of activity. It's like, you know, Pachinko, which is a game probably before your time. But Guy played it a lot. Sam Stratta. Right. Right. So the Nordstrom to me is sort of the most interesting and actually the least likely. It's sort of the idea of a family raising debt to buy out the company. And I think at one time maybe there was a real estate aspect of it.

2:11So many of those pieces aren't really in vogue anymore. Maybe they should be. But certainly the cost of capital of doing a deal has gone up tremendously. So that one and you don't want to be an indebted retailer trying to compete in this world. So that one is a little harder to fathom. I could see maybe a merger with another company that may be that's in the same business where there's some synergies there. Similar in the Macy situation, which it's interesting to me how this is evolving. I do think that here's a chance now for Brigade to show they're serious and that they do really have financing.

2:48And they've said, if you can show us your books and we think, you know, we think there's more value there so we could see a deal worth more than 24, which is their current bid. It's not a bid. It's a this is our level. It's not an actual formal bid. So that's sort of interesting. The Gildenware story is a really odd one where the CEO was thrown out last year for not doing enough, not really being a CEO. Apparently, that's sort of interesting. But I believe that was a decent chance that gets sold. It's cheap. But this whole space was so cheap. So that's not surprising that now there's interest.

3:23That's exactly right. The whole space has been cheap. And I think what this tells you is the market is saying, you know what, maybe it's a bit of an all clear sign. We're through COVID. The recession everybody's talking about is not coming. The valuations make sense. We can wrap our head around the business models. Now's the time to sort of act. And maybe that's going to be exactly true. And, you know, some of these stocks were parabolic moves. I mean, pull up Abercrombie & Fitch real quick, A &F. If you look at this stock and you'd be like, oh, my God, this is a parabolic move. We've seen this in technology stocks.

3:51It has to be expensive. You know what? Even despite the move we've seen, it's still actually a very reasonable valuation for some of these names. So you can understand why people are getting their arms around them. I still think, you know, we'll talk about Macy's in a second. That probably sort of levitates up to that 24.5, 25 level. The one that sticks out to me, though, continues to be Home Depot. And we can pull up a chart. Bit of a double bottom. We flagged that a couple months ago. I don't know if it makes that prior all-time high, but this is one that probably continues to grind. You're probably watching Capri.

4:21I was watching Capri. I'm out of Capri. I sold it around$50 because if you look at it on a chart, it just really hasn't performed the way it bounced that first day when it was announced, or I should say as soon as it was announced. Really didn't hold price. Kind of fell in a precipitous fashion. Sold that. I sold my tapestry. $48 for tapestry,$50 for Capri. And as soon as we were doing this, I knew Guy was going to bring up Abercrombie. Abercrombie is up. And Guy's talked about this a lot. It's up 400 % on a one-year performance. It was better than NVIDIA last year. But if you look at American Eagle, same type of thing.

4:58That chart is smooth, easy, up 84%. So it's funny the things that are gaining in the retail space that it's not really the department stores. So Macy's has that 24 bid. It's not bid. You said$6.6 billion is what they're willing to pay. Are they willing? And I saw the interview when they originally said maybe a couple of weeks ago slash months, what would you be willing to pay? So I'm not going to bid against myself, but a considerable amount more. So Macy's still in play for another couple of bucks to the upside. I feel like retail is a space that you've once poo-pooed, Dan, saying that, you know, the consumer is going to fall out of bed when unemployment goes higher, blah, blah, blah.

5:38Yeah. Maybe we've gone through the worst. Well, it's interesting. I think we spent a lot of time talking about Dix last week, right? And so we saw that move to the upside when that stock blew out to an all-time high after good results. And then, you know, we've seen Foot Locker in the last couple weeks. We're going to get Nike in a couple of days. So I think for every Dix, you know what I mean? And you know what I'm talking about, Steve. There is a Foot Locker, right? And so that's why I'm really interested to see it. I had a dime for every time I've heard that. No, I know. But, like, so my point is, like, I want to hear what Chewy has to say about online sales.

6:08I want to hear how Nike is navigating the kind of geopolitical environment. I want to hear about the breakdown between online and stores and that sort of stuff. But again, I think a lot of this stuff kind of seems kind of one off. You know, look at a Costco. We have Walmart at all time highs. Costco didn't see an uptick for a week after it reported its earnings. So I guess my point is, it's like it's easy to poo poo a lot of this stuff. But I think it is getting a bit more stock specific. And then you start throwing in the potential for M &A. And that changes the game because some of the dogs end up becoming darlings.

6:38Well, interesting, tomorrow morning, I think we'll see Cigna Jewelry, which had a very difficult pandemic because nobody was getting engaged. Right. And it takes a couple of years of dating before you get engaged. So they're still trying to work through that. Apparently, this is how it works. So that stock, it's not expensive on a P.E. basis, 10 percent short interest. That if they come up with decent numbers, that could really pop tomorrow. They should be coming back to pre-pandemic levels. But at this point, if you if you do the two year sort of delay. Yes, I think their inflection point is upon us.

7:08it. It's interesting. Dick's Sporting Goods comes out DKS. I mean, you would think again, pull up a chart and look at the movie, be like, oh, my God, it's got to be expensive. Actually, no. It trades at less than 15 times earnings, probably has, I don't know, 11 percent or so EPS growth. Just came off after the quarter, I think on March 15th. A bevy of analysts raised their price target. I think the average price target now, according to facts that is 211 and a quarter and they're probably too cheap. So what I think you're going to see over the next couple weeks or so are analysts that will continue to sort of chase the move to the upside in a name like seasonality.

7:42You're going into their sweet spot with a lot of sports coming back out. Yep. Let's get more on the outlook for M &A and retail with former Toys R Us CEO, Gerald Storch. Jerry, great to have you with us. What do you think is in the air at this point in the business cycle that is creating the stir in retail M &A? Well, it's not all unusual when you have trouble businesses or sectors to look at different solutions. If you were the Nordstrom family, I'm not surprised at all they're looking at something different. Basically, their stock has been marooned at the same level for over 20 years. And they made an offer before.

8:15It was rejected by the board. It's kind of tough when you're inside. You need the board to approve it and all kinds of things when you go private transaction. But what they're doing clearly isn't working, particularly for department stores. And so there are obvious parallels between the the Norseman situation and Macy's ones. In both cases, they're looking to see, can we take this private? Because when we're private, maybe we can run it differently and do things that are more revolutionary in terms of the business model, you know, because you can make changes outside of the public eye without that kind of glare of having to make every quarter.

8:46And so they have in common this notion that being private might be a better way to run it. It's Karen. Thanks for being on. The history of retail sort of littered with leverage buyouts that didn't work. And so what do you think the new model is given where rates are? How much equity do you think you need to have to be able to do a deal where the company isn't burdened by too much debt? Well, I think the first deals done in retail were done at a higher leverage ratio. As you look back, I saw a study recently. It's very clear that was true. There was a sense these retail companies were cash machines and could keep spinning off that cash.

9:22But then you had, you know, competition from the Internet, for example, e-commerce and Amazon, and need to invest in this whole new platform on top of everything that you had in front of you. And you had rising competition in the case of the department stores from the off-price retailers like TJ Maxx and Ross stores are brilliant. So people recognize that. And so the new leverage that would be applied to these companies, I would believe, would be less than what you saw in the early private equity deals. So people have gotten smarter as they've seen the history of what's going on here. So, Jerry, just sort of on the side of Karen's question there, what do I make of this environment right now as far as retail?

10:02Is it, to Dan's point, stock pickers, which we could all agree with? What do we see in the environment? What's the landscape right now in the cycle of retail companies? Look, there are clear winners and losers. That's what's going on. You say stock pickers. I mean, some companies are doing well. The consumer is clearly getting stretched. The most recent retail sales reports last two months in a row clearly were not good, no matter what you want to say about what happened last fall or didn't happen last fall. It hasn't been so good lately. But companies like Walmart or TJX or Costco or Amazon have done well regardless.

10:36And consumers are flocking to those names. And you mentioned five below tomorrow. I would expect similar kind of results out of them. There has been very little change, by the way, in who these winners and losers are. If you go back and look at what happened in the third quarter of last compared to the fourth quarter, almost every retailer that posted negative same-store sales in the third quarter posted very similar, by the way, negative same-store sales in the fourth quarter. Same thing as you look at companies that were positive, again, like the Walmart, TGXs, very similar numbers. They didn't even change very much.

11:06So Walmart was up 4.9 % same-store sales in the third quarter, up four in the fourth quarter. The stocks may bounce around on the earnings days because expectations have been set for differential performance. But then what you see is they're doing the same thing they did before. You know, in the case of the department stores, they were pretty steeply negative in the third quarter, and they're still negative in the fourth quarter. The outlooks aren't very good. Similar for a company like Target, you know, which has historically been a great performer. They were negative 4.9, same-store sales in the third quarter, negative 4.4 in the fourth quarter, while Walmart was up 4.9 and 4.

11:39So, you know, that gap is one of the highest in history. So the winners are clearly winning, and the losers clearly aren't doing so well. You know, if you want any single metric in retail, look at same store sales. That's going to tell you what's going to happen over any meaningful long cycle. When you think about the retail landscape, Jerry, which retailer do you think gets taken out? What's top on your list? I don't think by taking out. By the way, I, you know, want to be public about the fact I'm actually on the slate for Arkhouse and Brigade, you know, of directors have nominated for Macy's.

12:10So, you know, obviously, I think that's a real situation. I wouldn't be involved in that situation. So the department stores have been struggling for a very long time. We're talking decades. And it's clear that what they're doing is not working. So often, oh, we're re-merchandising and reinventing the store. We're cutting expenses. We're closing more stores. And all that's done is give market share to the off-price players, to the discount stores, to the Amazons of the world, to the special ed players. Look at this. Look at this. You've got you talk about Nordstrom's about worth about three billion dollars equity cap.

12:44Kohl's three billion dollars. Macy's six billion dollars. Dillard's the best one. Seven billion dollars. The total department store sector has equity cap of 19 billion dollars. Meanwhile, TJ Maxx is worth one hundred and twelve billion dollars on their own. Ross stores,$49 billion. Burlington,$14 billion. $175 billion market value for the off-pricers compared to 19 for the department stores. If you remember the old saying, why pay department store prices, that was the TJ Maxx slogan for years and years and years in their advertising. I think the question now is, you know, why pay prices for the stocks of department stores in today's world?

13:22Clearly, they have lost tremendous value to these other sectors. Without even getting to discount stores, Walmart and Target's growth, or to Costco, or to the e-commerce, the world has shifted mightily during this period, and we need to see some kind of a change. I guess the storage portfolio has no department stores in it. Is that right? As I mentioned, it doesn't mean I'm not involved in these situations in many ways. But the growth in retail has been in the obvious places. And meanwhile, the older situations, you know, without a dramatic change, we're talking about 20 years plus of similar stagnation.

14:03Kohl's is the same thing, by the way, for all of these names. So why do we think it's going to get better now? You know, I just think that that's just foolish unless there is dramatic and meaningful change. Jerry, thanks. Always great to get your take. Jerry Storch. My pleasure. Well, Morgan Stanley put together a list of potential targets. And on that list notably was Kohl's. as well as Under Armour, which I thought was sort of interesting. Under Armour, well, that is, and Steve, I'm sure has thoughts. I'll go back to Dillard's real quick. Again, throw up a chart. I mean, go over the three-, four-year chart in Dillard's.

14:33A$30 stock at sort of the height of COVID, June of 2020-ish. I mean, look at the stock now. They just reported what was a good quarter, but year over year, earnings actually decreased earnings growth, yet valuation is still compelling, and they're sort of running laps around some of their competitors. So despite this move, if you go longer term, you see exactly what I'm looking at. I mean, this stock, there's certain stocks that despite the moves have still of value. And this is one of them. All right. Let's go back to the market rally. Major indices all closing well in the green with the S &P posting its 18th record close of the year.

15:05All this ahead of tomorrow's Fed decision. Meantime, the yield in the 10-year softening, retreating from almost one-month highs. But the moving crude stoking some inflation fears. WTI now up nearly 17 percent this year. So how challenging is this backdrop for the Fed right now? What are we expecting, if anything, out of this meeting tomorrow? So I think what the market has told us, they're going to do nothing. What I think they're going to do is talk down or talk around tweaking QT. Because you can't have QT, if you're eventually setting the stage for a rate cut, you can't be letting stuff fall off your balance sheet at the same time.

15:41Because one is dovish, one's hawkish. So you have to do something with QT before we even talk about rate cuts. What do you think, Karen? Is it going to change anything, you think? I mean, I don't think they should do anything. I think inflation is heading the wrong way. And if we look at, you know, oil, we talk about that all the time. Oil, going into, we're almost at the driving season. Oil was about$14 lower this time last year. That's a pretty big move. So I don't think they should do anything. But if they do, then they got to do the cut and talk really hawkish. But it's become a real political.

16:14I mean, you saw the letter from Elizabeth Warren saying you better cut rates because it's really hurting the alternative energy companies. We mentioned it. We mentioned it last night. Elizabeth Warren and Bernie Sanders saying you got to cut rates, do it fast, which is I mean, they're entitled to their opinion. It's the absolute wrong opinion, in my opinion. I think it'll hurt more people than it'll help. But again, politics gets in the way with Karen's point, though. I mean, the two most important commodities out there, I think, are crude oil and copper. and then you throw gasoline somewhere as sort of underneath crude oil.

16:42Gasoline is up significantly why these refiners are doing so well. And copper is breaking out right before our very eyes. So I don't know what would force the Fed to move in a meaningful way. And quite frankly, I mean, I'm not a big fan of the Federal Reserve, but I think Jerome Powell's been pretty steadfast in his want to slay this inflation dragon. Yeah, and I think if you want to think about it through a political lens, I don't think anyone's listening to Bernie and Warren right now. And I think the Biden administration realizes that they have, what, seven and a half, eight months until the election.

17:12And, you know, if they don't have inflation, at least the idea of it under control, I don't I would suspect that they're not dying for what would be politicized rate cuts that would just juice the stock market or juice the economy. If inflation were to become embedded, because that's the thing that they are getting very poor marks on right now as it relates to the economy. And we can all sit around here and say stock market's at high. Housing's OK. Unemployment's still below 4 percent. You know, all those sorts of things. I know that consumer credit's picking up and defaults are kind of ticking up a little bit.

17:42But if that stuff starts to go the other way, that would be a real problem. You got to cut. You got to cut before that stuff goes the other way or else they're going to be late. So that's the misconception I think the market has is that we're waiting for unemployment to spike higher. We're waiting for defaults to spike higher. If we wait and we see that they've waited and they're late. So that's the only reason why it might seem the wrong thing to do, but they have to do it to stay ahead of it. All right. Coming up, we are checking in on NVIDIA after its big GTC conference. What CEO Jensen Huang had to say about all aspects of the company.

18:15We're on the semi-trade next, plus builders bouncing back. Housing stocks in the green after strong housing data is the group building up a strong foundation. Don't go anywhere. Fast Money's back in tune. This is Fast Money with Melissa Lee, right here on CNBC.

18:39Welcome back to Fast Money. NVIDIA shares are racing early losses and closing the day up a percent. The move coming after the chipmaker unveiled its latest AI platform, Blackwell, last night. CEO Jensen Huang sitting down with Jim Cramer this morning to talk about how the platform's integration with other companies puts Nvidia everywhere. The application software is being offered by Cadence and Synopsys and Ansys and DeSoe, really amazing company that we work with DeSoe and Autodesk and Adobe and others. Our technology is integrated into theirs. Our technology is integrated into all these computer makers and the world connects it together and that's the reason why Nvidia is everywhere.

19:21You can catch more of that interview 6 p.m. Eastern time tonight on Mad Money. Elsewhere in the AI trade, Supermicro. Those shares tumbling about 9 % after the company filed to sell an additional 2 million shares using the proceeds to fund the purchase of inventory, expand manufacturing and research and development. The company actually was intending to do that pre-market today. It got delayed, which is sort of unusual. It aims to do it post-market. So there's some other little drama surrounding that share sale for Supermicro. This is the second one, right, over the course of the last couple of weeks.

19:51Good for them, by the way. I mean, they should be doing exactly what they should be doing. And even with the move, I mean, it's not ridiculously expensive on valuation. But given the stock move, Karen says this all the time. I mean, you've got to take advantage of it without question. NVIDIA price action today was very good. I mean, early on today, I mean, it was looking like it wanted to continue to break down from two Fridays again reversal. And the fact that it actually closed positive on a day is encouraging. You know, let's continue to see what happens over the next week or so. I still go back to that Friday of two weeks ago, the reversal, and say that might have been a top.

20:21But, I mean, you've got to sort of be your own guide at this point in this name. Rosenblatt Securities' Hans Mosesman says that they'll likely be sold out of the Blackwell chip through 2025 already, through next year. Well, NVIDIA is everywhere, Mel. One of the things that's interesting is that AMD had a bad day today. AMD is down 20 % from those highs that it made just a couple weeks ago on that big reversal day. And so it's interesting to me to see there's a lot of dispersion in this space right now. We saw Broadcom a couple weeks ago report the stock has barely seen an uptick. So it's interesting that the semi-trade is now becoming increasingly concentrated around NVIDIA.

20:58And NVIDIA, no doubt about it, trades well. It is consolidating here in and around that$900 level. When it's down, people buy it. It seems like there's no bad headline for this stock. But I just say this. is like that guy walked out there for two hours, walked around a stage in front of 16 ,000 people that were gagging over every word of his. People, just come to your senses a little bit. I mean, like, this is a company that produces a product that you don't even touch. It's not even in your pocket, like an iPhone or anything like that. So the last time we've seen this sort of excitement was in and around Apple.

21:30And the only point I'm just making is, and you can say this, we're going to do this every night. You can say this, that, you know, it has gained a trillion dollars in market cap this year, this quarter. It's anticipating Blackwell. It's anticipating being sold out for a year. All of this stuff. So that's it. Have fun with it. But it still doesn't mean that it still doesn't mean it can't go further. I don't think that's what you're saying. Right. Well, it could go further. Or the markets were flat footed when it came to anticipating what AI should be and would become. And therefore, it should not have been at those.