Before Julian Day came to RadioShack, it was the most undermanaged and sloppy retailer around, Cramer says, with countless stores and no strategy whatsoever. But now the company is restoring profitability and has the chance to develop growth strategies, which is what businesses are supposed to do.
Cramer isn’t saying that RadioShack isn’t broken, that it's a great retailer. Same goes for Sears. But Radio Shack is generating a lot of money while it tries to pick itself back up. There aren’t a lot of retailers out there with the capability of generating cash flow as they try to turn themselves around.
As for Sears, Eddie Lampert is piecing the company back together brick-by-brick, Cramer says, even in the face of a group of consultants who seem to exist for no other reason than to berate him to the media. His critics won’t give him the benefit of the doubt because they figure he couldn’t bring back K-Mart from the dead and should have just let it go when the companies merged.
Apparel numbers at Sears have improved. The retailer is stuck with a tough housing market, but Eddie’s attempts to hedge out the housing risk just seem to earn him more criticism. But any other business outside of retail uses hedges when they know things could go wrong. What’s the problem when Sears does it, Cramer asks? Eddie’s even come out and said explicitly that he isn’t running a hedge fund, but nobody will believe him.
The fact is, despite the critics, Eddie Lampert is running Sears for a profit and not for meaningless data points that will make analysts happy, Cramer says. Sears’ most recent 10K indicates he’s putting some more cash back into the business as incremental capital expenditures, a sign he’s ready to grow. The money is being put into home appliances at K-Mart and information-technology systems, and Cramer considers that a further sign that turnaround is continuing briskly.
Bottom Line: When it comes to retail, the analysts are the last people you want to follow if you’re trying to make money. Cramer recommends buying Julian Day’s RadioShack and Eddie Lampert’s Sears Holdings because both of them have earned his trust. And trust beats same store sales almost any day of the week.
Questions? Comments? firstname.lastname@example.org