×

Cramer: Wal-Mart is just in the first inning

Employee turnover is expensive, and training new workers is a deadweight cost. Wal-Mart CEO Doug McMillon finally figured that out and took action, with Jim Cramer applauding the move.

"I know it seemed a little ethereal to worry about morale at Wal-Mart, but McMillon was right to be worried and these wage increases are at the heart of the turnaround," the "Mad Money" host said.

Wal-Mart dropped a bomb on Wall Street in October, when McMillon said the company would need to spend money on e-commerce, supply chain management and wages for employees.

The news sent the stock plummeting 10 percent.

The company made back those gains, and then some, when it reported sharply higher than expected earnings, including a same-store-sales number that was double what Wall Street expected. Wal-Mart's success was driven by strong sales in health, wellness, apparel and home and seasonal goods.

In other words, Wal-Mart is doing well in almost all of the categories that other bricks and mortar retailers have struggled with this season.





Wal-Mart Employee handles money
Patrick Fallon | Bloomberg | Getty Images
"I'm calling it inning one of the turn." -Jim Cramer

Cramer attributed the success of Wal-Mart to McMillon's recognition that both its workers and infrastructure were starved. It was clear to him that the previous regime did not want to take the risk to spend money and improve these things.

Wal-Mart announced a pay increase for more than 1.2 million employees that took effect in February. It was one of the largest single-day, private-sector pay increases ever for the company.

Read more from Mad Money with Jim Cramer

Cramer Remix: A stock that can handle anything from the Fed
Salesforce CEO: Using the power of business for social change
Cramer: Secret to winning in a Fed sell-off

The increase follows in the footsteps of Costco, which has publicly professed the commitment to paying its workers a livable wage. The lower turnover rates are a direct save to the bottom line.

Cramer was impressed with Wal-Mart's new delivery program; it allows customers to order items online and receive delivery at their cars. The program rolled out to 40 locations and became a hit.

"Who would ever have imagined that we would beg for a Wal-Mart? Apparently, though, that is what America wants," Cramer said. "I'm calling it inning one of the turn."

Wal-Mart has the scale to disrupt, and did so historically. It simply lost its way, Cramer said, and didn't have a CEO who was willing to take a financial hit in order to turn things around. It now has those things, which means Cramer is calling the stock a buy.

Questions for Cramer?
Call Cramer: 1-800-743-CNBC

Want to take a deep dive into Cramer's world? Hit him up!
Mad Money Twitter - Jim Cramer Twitter - Facebook - Instagram - Vine

Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com