The sports retail giant told shareholders that it will have to invest in its online business, which grew from 19 percent to 23 percent over the past year, to fend off competition from Amazon. The expensive move to capture online shoppers is reflective of the overall market and could ruin the company’s margins, Cramer said.
“That means Dick’s needs to spend even more money building out its own omni-channel presence while also suffering from lower gross margins because competition from Amazon always puts pressure on your pricing,” the “Mad Money” host said.
The special Nike gear that can’t be found online along with outdoor and fitness equipment sold well in Dick’s stores, Cramer noted. Yet, consumers are turning to Amazon and elsewhere to buy products not exclusive in Dick’s stores, he said.
“Dick’s is the best at what it does, but just about everything else that they sell you can get on Amazon,” Cramer said.
Dick’s plans to spend money at Facebook and Google to beef up its digital marketing and boost traffic on its website. The company also said it has to invest in robotics to mitigate its freight and shipping costs, an advantage that Amazon already has with its web services business, Cramer said.
“Dick’s is just supposed to be a company that knows sporting goods. They know baseball bats, Air Jordans, not robotics for heaven’s sake,” the host said. “So Dick’s has to keep plowing money into the most expensive, least-rewarding channel to keep up with Amazon, a company with much lower expenses.
“No wonder Senator Elisabeth Warren is calling for the break-up of Amazon. It has all of the tools it needs to bring you in without even having to [give] money to Facebook and Google,” he added.
Cramer also recommended Adobe and Salesforce.com because they work to make sure customers enjoy their experience and remember to come back. Investors could even make a bet on Honeywell, which sells robotics to Amazon, he said.
Shares of Dick’s closed down more than 11 percent in Tuesday’s session. The stock is up nearly 11 percent year to date.
“I think you gotta stay away because right now it’s just too hard to be a brick-and-mortar retailer if you have too much commodity and merchandise that can be bought more cheaply and conveniently via Amazon Prime,” Cramer said.
Disclosure: Cramer’s charitable trust owns shares of Amazon, Salesforce.com, Faecbook, and Alphabet.
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