Companies That Spend Will Survive
Here's a novel idea: Companies that spend extra to better serve their customers will emerge from this recession stronger than those who lay off workers en masse and slash costs, thereby reducing those services, in an attempt to survive.
That's what restaurateur Danny Meyer calls the "hospitality quotient." Customer goodwill and brand loyalty offer better protection from the downturn than spartan cutbacks. The idea may take some getting used to, but Meyer's had success as CEO of Union Square Hospitality Group and he canonized his expertise in Setting the Table: The Transforming Power of Hospitality in Business. Back in January 2007, he told Mad Money that Starbucks was out and Chipotle was in. Since then SBUX is down 72%, the S&P 500 is down 42%, but CMG has lost only 16%. Negative or not, that's some serious outperformance.
Meyer created a portfolio of sorts, which we're calling the Meyer Hospitality Economy index, consisting of names like Google, Apple, Goldman Sachs and American Express, to track his theory's viability. As part of Monday's Mad Money, Cramer compared the index to the S&P 500 and went deeper into depth with Meyer about his idea. Check out the video for all the details.
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