Wendy's
Cramer said in 2011, Wendy's brought in a new CEO who embarked on a massive turnaround plan that's just recently begun to gain momentum.
"It involved rolling out hot new products, dramatically changing the balance of company owned versus franchised locations, and fending off the competition with a two-tiered menu system that includes selling higher-quality fast food offerings at higher-prices, while also catering to the cost-conscious with a much cheaper value menu," Cramer said.
But of all the aspects of the plan, perhaps nothing has goosed the bottom line more than the company's decision to refurbish stores.
"Wendy's started by upgrading 48 stores in 2011, and at those 48 locations the sales are now at least 25% higher than they were before the remodeling," Cramer said.
"Going forward they plan to remodel 50% of their company-owned units by the end of 2015, and 20% of the chain's total stores," added Cramer. If the pattern holds, the remodeled stores should experience a big bump in sales."
Already an effective catalyst for Popeyes, "I think the redesign alone is reason enough to buy because it gives Wendy's a multi-year runway of remodeling fueled growth," Cramer said
However, Cramer likes Wendy's for other reasons.
"Right now the company owns 22% of its 6,500 locations with the rest franchised, but through the second quarter of 2014, Wendy's plans to bring that figure down to 15% by selling roughly 425 units to various franchise operators, something that should give the balance sheet a tremendous boost," he said
"Also, long-term Wendy's thinks that it can open an additional 2,500 to 8,000 new restaurants internationally—so they could potentially more than double the store count," Cramer added.
And, on top of all that, "the company's paid down $400 million in net debt, bringing its total debt to $1.47 billion, or about 4 times the company's earnings before interest, taxes, depreciation and amortization, down from 5 times that number at the end of 2011."
All told, "I think Wendy's is perfectly buyable on the next market induced pullback," Cramer said.
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Rite Aid
Cramer sees Rite Aid as a turnaround story that's been at least 3 years in the making.
Back in 2010, "Rite-Aid began to dramatically cut its general and administrative expenses. Also, the company's upped its exposure to private label knock-off products, which carry much higher margins for retailers," Cramer explained.
In addition, "the company also decided to try to bring together the front-end of the drugstore with the pharmacy via a strong focus on health and wellness. And, Rite Aid has introduced a 15-minute prescription guarantee."
On top of that, "Rite-Aid has done a terrific job of refinancing its enormous debt load," Cramer added.
Cramer thinks the latest metrics confirm the plan has gained a solid foothold.
Earlier in the month, Rite Aid reported on the four weeks that ended July 27th: total sales rose by 0.9% to $1.898 billion, while same-store sales rose 1.3%.
According to the website Seeking Alpha, "While this would normally be considered marginal growth, any growth should be considered a positive sign for Rite Aid."
Cramer agrees.
And according to Zaks, Rite Aid reported a quarterly profit for the third straight quarter in Jun 2013.
That too, Cramer finds impressive.
All told, "I see it as a turnaround play that has a long way to go before it's done going higher," he said. "Therefore, I think the stock is absolutely worth buying on a pullback."
