Cramer: Walmart Is Making a Monumental Change

 | Oct 11, 2017 | 2:20 PM EDT
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Walmart Stores Inc (WMT) has been re-rated. This is an important term and I want everyone to understand it. What's happened here is rather monumental. The company is actually doing what is theoretically impossible: It is upping its spending on e-commerce, developing systems that will make Jet.com a formidable competitor. It is increasing its buyback to $20 billion, and paying people more while improving the store experience and increasing earnings, plus possibly beating Amazon.com, Inc (AMZN) .

Yes, you heard me, beating Amazon.

And you are getting the whole shebang for a miserable 19x earnings.

I repeat, this is not supposed to happen. My only regret is that I haven't been pounding the table more for this wonderful situation.

This is a stunning re-valuation for a large capitalization stock. It's up $8 in three days -- and it is a $250 billion market-cap equity. That's an amazing amount of buying power.

Why am I so stunned?

First, no one takes on Amazon and survives, right? Who had possibly been in the ring with Amazon and not been knocked out? Who has managed to go even a couple of rounds with the Seattle behemoth.

Second, it is understood that if you do take on Amazon it is going to cost you every penny that you have as we have seen with countless companies most notably of late, Nordstrom, a company which has spent billions on its e-commerce strategy and still can't hold a candle to what Amazon has done. Yet here's Walmart having enough cash generation to buy back $20 billion in stock.

Third, the decision a couple of years ago, made unilaterally by CEO Doug McMillion, to pay his workers more is having tremendous dividends.

Have you seen the stores lately? My wife is on the board of Bucknell, a great university, and we recently went to the parents' weekend in Lewisburg and there was a Walmart located across from the hotel lot. Her daughter's a senior, so we've been to it before. But the whole experience was different. The people were helpful and friendly. The store was immaculate. The Halloween decorations were funny, silly and tremendous. We were throwing a "darty" -- little did I know that was a daytime party -- and we bought everything there, including the decorations, and I couldn't believe how little it cost! I found myself loading the cart up just for the bargains. The party went off without a hitch and I have Walmart to thank for making it so easy and inexpensive. This is not the Walmart I know. Doug McMillon, I beseech you to give those workers a bonus!

This is a company with scale, the kind of scale where it can subtly suggest to suppliers that perhaps working with Amazon web services is like trading with the enemy when you could always use Microsoft's Azure or Google's web service. I don't think you can ever dent the juggernaut that is Amazon web services but I will say this: Walmart, by virtue of its huge network of stores, can do plenty of damage to the front end. The idea that somehow the 400 Whole Foods store count is necessarily going to compete with Walmart's 5000 stores might be a little fanciful, especially if people like 'order ahead' and 'pick up' options.

What had been lacking is a belief in the management, which used to be so strong but had lost its way. Now it has found its way again, and all I can say is that even if Amazon isn't knocked down, I have no idea how anyone else in bricks and mortar can go against these guys without a specific dominant niche -- like high-end jewelry or women's clothing.

It's a two-man race and one company sells for 234x earnings while the other goes for 19x earnings. No one big is going to sell Amazon; it's too good. But there's a world of portfolio managers looking for another retailer that can be dominant -- and is cheap with a good balance sheet and a clear strategy. They have found it in Walmart.

Which is why the stock's not done going higher.

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