Strong management can make all the difference for a company to “change their stripes” in a corporate pivot, CNBC’s Jim Cramer said on Thursday.
“While it’s very difficult, it does happen,” Cramer said.
Cramer pointed to Costco as a prime example of the difference capable management can make. The big-box retailer is used to having to shift strategy and stock month-to-month, Cramer argued, which means that a weak report for Costco shouldn’t deter investors from snapping up shares.
That’s because Costco’s management team stays true to the company’s thesis and “always tries to get the best possible goods in and charge the lowest prices,” Cramer said.
“We’ve seen this story so many times before,” he continued. Cramer thinks management is too skilled to suffer any longer than a month before it executes a successful turnaround and refreshes its inventory.
But that isn’t a given, Cramer said, pointing to Gap’s higher-end Banana Republic line as an example of an ineffective pivot.
The Gap renovated many of its Banana Republic stores that “look amazing,” but Cramer says that as the smallest part of the larger Gap empire, those improvements will do little to staunch “disappointing” performance at the flagship Gap mark. Management has been a pain point for the retailer, with a changing ensemble of chief executives making it hard to maintain a consistent vision, he said.
A bevy of other, non-retail companies are suffering as well, Cramer said, including medical-technology company Medtronic and industrial concern 3M. Both those companies have lost control of their destinies, Cramer argued.
There’s hope in the food companies, Cramer noted, pointing to stark evolutions from JM Smucker and Campbell Soup, both of which have rebalanced towards snack foods. Success can also be found at General Mills, Cramer said, which began to “fully embrace” pet food with the acquisition of its Blue Buffalo brand. Pivots like those are realized by management that can execute a clear vision and embrace “constant reinvention mode,” Cramer said.
It’s simpler said than done. But at a well-managed company like Costco, Cramer has no concerns. “The sellers almost always end up kicking themselves.”
