The direct selling model is going “great guns,” Cramer said Tuesday, adding it could be the best way to sell goods in the Third World.
The “Mad Money” host pointed to two big direct sales names, which both reported postive earnings on Tuesday. Herbalife delivered a 19-cent earnings beat off a $1.22 basis on revenues that rose 28.5 percent year-over-year. The seller of nutritional supplements also raised its guidance, Cramer said. Avon Products also delivered an upside surprise, even though it has long been a chronic underperformer.
Both reports were released fresh on the heels of Cramer’s interview last week with Rick Goings, CEO of Tupperware. Goings told Cramer women around the world had signed up in droves to be sales representatives for Tupperware products. The executive added that in this evironment, direct selling adds a personal touch and is more effective than traditional advertising. Being as people tend to listen more to testimonals rather than advertisements, Cramer think the direct selling model could be the best way to sell goods in the developing world.
Despite the good news for direct sellers, Cramer complained that these kinds of companies have never "gotten their due from Wall Street." While people have acted as if the business model is “bogus”, Cramer thinks it's actually fabulous.
"I think it’s time to recognize that the direct sales model works and works well," Cramer said. "Tupperware and Herbalife are great businesses and even a loser like Avon’s now succeeding thanks to the power of the direct sales model."
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