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Cramer: The one big problem with Wal-Mart's stock
On Thursday Wal-Mart (NYSE: WMT) announced it would increase the wages of its 500,000 employees by approximately a dollar an hour, and ultimately take a hit on next year's earnings to do so. And while Jim Cramer thinks this move is awesome, he is also concerned.
"All I can say is hallelujah. This move, a big break with the past, shows that the new CEO Doug McMillon gets it," said the " Mad Money " host.
In Cramer's perspective, the CEO has finally tapped into what Wal-Mart really needs; a motivated workforce that will take the worlds' largest retailer to new highs.
Yet there is a big problem-Wal-Mart is still paying much less than most other quality retailers. For instance the average pay at Costco (NASDAQ: COST) is $21, while the average pay at Wal-Mart next February will be $10 an hour.
"Costco's probably the single-most generous retailer in the country when it comes to benefits, which, as we know can be worth far more than hourly wages in many cases when it comes to keeping the best employees," said Cramer.
The last time Cramer interviewed Costco's former CEO Jim Sinegal , he shared the secret of his success: The reason why it is successful with both customers and shareholders is because the company pays its employees more than everyone else.
Ultimately a happy employee leads to fewer turnover, less training costs and more time spent on innovation than working with new employees.
Starbucks (NASDAQ: SBUX) has also figured out this key to success, and is offering tuition reimbursement for a portion of its employees, as has Chipotle (NYSE: CMG) with its high rate of promotion within the company.
"But McDonald's (NYSE: MCD)? How do you say revolving door? That's OK when the menu is simple, but McDonald's has anything but a simple menu," said Cramer.
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So while Wal-Mart certainly made a step in the right direction with its announcement, Cramer thinks there is still work to do. One should not discount the importance of having happy employees, as it will also ultimately pay off for shareholders.
"Now if you can just make that shopping experience a little more special, your stock might be the one to buy."
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