Strong management can make all the difference to a company “changing stripes” in a corporate pivot, CNBC’s Jim Cramer said Thursday.
“Although it’s very difficult, it happens,” Cramer said.
Cramer pointed out Costco as an excellent example of the difference competent management can make. The big-box retailer is used to having to change strategy and stock from month to month, Cramer said, meaning a weak report for Costco shouldn’t deter investors from taking stock.
Indeed, Costco’s management team stays true to the company’s thesis and “always tries to get the best products possible and charge the lowest prices,” Cramer said.
“We’ve seen this story so many times before,” he continued. Cramer thinks management is too competent to suffer more than a month before executing a successful turnaround and refreshing its inventory.
But that’s not a given, Cramer said, pointing to Gap high-end Banana Republic line as an example of an inefficient pivot.
The Gap has renovated many of its Banana Republic stores which “look amazing”, but Cramer says that as a smaller part of the larger Gap empire, these upgrades won’t do much to stem the “disappointing” performance. ” from the flagship brand Gap. Management has been a pain point for the retailer, with a changing set of chief executives making it difficult to maintain a consistent vision, he said.
A host of other non-commercial businesses are also hurting, Cramer said, including a medical technology company Medtronic and industrial company 3M. Both of these companies have lost control of their destinies, Cramer explained.
There is hope in food companies, Cramer noted, pointing to stark changes in J. M. Smucker And Campbell’s Soup, both of which rebalanced toward snack foods. Success can also be found at General Millssaid Cramer, who began “fully embracing” pet food with the acquisition of her Blue Buffalo brand. Pivots like these are achieved by management that can execute a clear vision and adopt a “mode of constant reinvention,” Cramer said.
It’s easier said than done. But in a well-run company like Costco, Cramer has no worries. “Salespeople almost always end up kicking themselves.”