• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Consumer Discretionary

Jim Cramer: Fixer Upper Success Stories

The market punished the consistent companies and rewarded the turnaround stories on Wednesday.
By JIM CRAMER May 23, 2018 | 03:16 PM EDT
Stocks quotes in this article: GE, TIF, RL, LOW, COST, HD, JCP, TGT

Each day this market distinguishes itself by its ludicrous behavior. Today the buyers went nuts for fixer uppers and punished the consistent companies as if they hadn't a clue about how to run their businesses.

Oh and heaven forbid there's no consistency at all? Then it's Katie bar the door as was the case with GE (GE) when CEO John Flannery spoke at a conference today and said that the recovery for the once giant industrial is not yet at hand, something that could put the already-halved dividend in jeopardy. The issue here: no one said it was a quick fix. But what people did believe is that we were farther along in the repair than when Flannery started in August of last year where his "this is not going to be a quick fix," comment would have been more apropos. To be fair to Flannery, who in heck would have known exactly what a mess GE was given how there was so much rosy talk about the company even a few months before he took over? We know now that the company's previous CEO put a very good face on a very bad situation. (Oh my, what a diplomat I have become.)

Now when I say "they went nuts" for the companies that have made what amounts to a quick fix, I am not kidding around. Not one, not two, but three formerly challenged companies reported star quality numbers today and were rewarded with gains that are usually reserved for takeovers: Tiffany (TIF) , with a stock that rallied 20%, Ralph Lauren (RL) , which saw its shares rise 18% and Lowe's (LOW) with a stock that jumped 10%.

Meanwhile consistent companies like Costco (COST) and Home Depot (HD) , both far superior in terms of long-term execution, saw their stocks decline for no other reason, I believe, then that their stocks were a source of funds to buy the fixer uppers. In Home Depot's case it's a literal translation: many a clever hedge fund came into Lowe's quarter owning Home Depot and shorting Lowe's given how many times Lowe's has disappointed. Sure enough, other than a couple of lines, notably appliances, it disappointed again. However, Lowe's has a new CEO, Marvin Ellison late of JC Penney (JCP) , but more important, from Home Depot, and he's known to understand what it takes to improve hard goods execution even though he failed to bring about a change at a company known for its apparel and make-up. 

Each day is a new day with a new theme in this market. So suffice it to say that Home Depot's stock is now the MUCH better buy. I say that because tomorrow will, no doubt, have a new theme appended to it. Lowe's is now in lala land as investors have tired of those humdrum companies with amazing performance and would rather take their chances with a different situation.

Now let's talk about the staggering gains in Tiffany and Ralph Lauren. As is often the case these are stories about changes in execution that are pretty extraordinary even as the gains seem a little overdone. Less than a year ago, October 2 to be precise, Tiffany appointed Alessandro Bogliolo, former CEO of Diesel and before that 16 years at uber luxury chain, Bulgari -- a place I always try to rush by with my wife given that the prices are by far the highest of any chain in the Short Hills Mall.

Well, talk about the right guy with the right skills for the job. Almost overnight, he has turned around what was once the stodgiest and least up to date luxury retailer. The numbers -- $1.14 when the street was looking for 83 cents and 7 percent comparable store sales versus 2.6% -- are stellar but they only tell a fraction of the story.

The changes are palpable. It's been ages since Tiffany refreshed its line, something that has to be done at even the most storied of retailers. So Bogliolo introduced Paper Flowers, a new jewelry collection that's staggeringly beautiful. I say that because it is what we gave my wife's daughter for graduation this weekend. We happened to have been at a fundraiser four weeks ago and my wife asked the female CEO sitting next to her if she had any ideas for a present. The CEO said how about Tiffany's. When Lisa balked because of the boring, played out nature of the place, the CEO said that there's a total refresh. One look at the website -- go there right now -- and you will know what I mean. Oh, and you know why else I am sending you to the website? Because before Bogliolo, Tiffany had a pathetic omnichannel. Go to the search bar, type in PAPER FLOWERS, and ask yourself, is that Tiffany?

The firm's got a bunch of slogans that resonate in a broader fashion, like "Believe in Love," which Bogliolo cites as a reason for a double digit growth in engagement jewelry sales. Sales were strong all over the place but New York and China deserve big shout outs. Bogliolo doled out credit -- doesn't cost you anything to do so -- and was incredibly self-effacing talking about how the whole segment did well in retail. But he's the real deal.

Speaking of real deal, Patrice Jean Louis Louvet, the new CEO of Ralph Lauren put on a commanding performance, with earnings of 90 cents a share when the street was looking for 83 and comparable store sales of minus one when minus 2.3% was expected. (Told you these are fixer-uppers.) 

Louvet kept the four-part message to his team simple: first, he wanted to elevate the brand to improve quality of sales distribution and product; second, evolve product marketing and the shopping experience; third, expand the digital and international presence of the brand and fourth, drive productivity.

I go over those buzzwords because these are precisely what the venerable brand needed. Ralph's style and taste are as impeccable as ever, but the place just wasn't run well under the previous CEOs. Louvet started by closing 25% of the department store points of distribution and 31 directly operated stores. That was brilliant because Lauren's stuff was just plain too available. He refreshed 80 of the chain's top department stores with new fixtures, lighting and lighter aesthetic, changes that brought instantly better performance than the control stores that had stayed the same.

Louvet's created excitement where there had been none. For example, he's doing some limited edition stuff, including Snow Beach which sold out within hours, causing a ripple of buzz where there hadn't been enough.

He also embraced digital, a weaker point of distribution for the company, which is a critical piece of the global growth strategy, and something that helped produce a 25% growth in Mainland China.

Finally he's speeding up the time to market of new designs, which, while still slow at nine months, will soon be down to six months and then three months, which will put it on par with a lot of the fashion forward European retailers.

I know these changes sound boring but they point out that the issue was NEVER the style of clothing. Ralph's clothes are both as fresh and as timeless as ever. It's the execution that's been missing, something that this new CEO has changed.

It's tough to watch the consistent companies' stocks languish. It's also difficult to watch some of the stories that are already turning, like Target (TGT) , see their stocks falter. Target's sin? It wants to grow its on-line business faster, something Wall Street has wanted. To do so it has to spend, and Wall Street hates that. You can't please these pencil pushers.

To me, though, today does say, keep your eyes open to change, because, boy oh boy, has it ever been rewarded. Or, to put it another way, instead of being so blown away by the new Tiffany designs, I should have been blown away by how the stock hadn't kept up with the changes. That's a tremendous lesson for all who seek to profit in the stock market from their own experiences.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned.

TAGS: Investing | U.S. Equity | Consumer Discretionary | Jim Cramer | Stocks

More from Consumer Discretionary

Penn National: Should Investors Put Their Chips Down?

Bruce Kamich
Jun 28, 2022 12:13 PM EDT

Let's check out the charts and indicators on this operator of casinos and racetracks.

I'm Warming Up to Carnival, but Not Ready to Climb Aboard Yet

Jonathan Heller
Jun 27, 2022 10:00 AM EDT

The stock price of a cruise line operator is becoming more reasonable, but its heavy debt load remains a huge concern.

There's No Clear Sailing Ahead for Carnival: Here's How to Play It

Stephen Guilfoyle
Jun 24, 2022 11:32 AM EDT

CCL did lose a lot of money, much more than anticipated, but there are positives.

Bearish Bets: 3 Well-Known Stocks You Should Consider Shorting This Week

Bob Lang
Jun 19, 2022 10:30 AM EDT

These recently downgraded names are displaying both quantitative and technical deterioration.

Beyond Meat Gives Investors Something to Chew On

Bruce Kamich
Jun 15, 2022 1:50 PM EDT

This veggie name is rallying sharply after a summer promotion announcement, but here's my beef with the charts.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 11:56 AM EDT STEPHEN GUILFOYLE

    Stocks Under $10

    Check out what's going on in the Stocks Under $10 ...
  • 12:04 AM EDT PAUL PRICE

    Two Good Signs -- Especially for Small-Cap Investors

  • 12:10 AM EDT PAUL PRICE

    More Insider Buying in American Woodmark (AMWD)

    American Woodmark , which I've discussed here fr...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login