Listen to Jim Cramer’s personal guide through the confusing jungle of Wall Street investing, navigating through opportunities and pitfalls with one goal in mind - to help you make money.
Mad Money w/ Jim Cramer
Mad Money w/ Jim Cramer 3/7/24
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[MUSIC PLAYING] My mission is simple-- to make you money. I'm here to level the playing field for all investors. There's always a more market summer, and I promise to help you find it. Mad money starts now. [MUSIC PLAYING] Hey, I'm Kramer. Welcome to Mad Money. Welcome to Kramer, America. I'm going to make friends. I'm just trying to make a little money. My job is not just to entertain, but to educate and teach, you call me 100-743-CBC. Tweet me at you, Kramer. When the book is written on this economy right now, it's going to come down to something that is pretty pedestrian. It's going to come down to chips. The chips in this bag and the chips on this rack. Now, I know it sounds like a gimmick. Maybe it is. But if you understand the zeitgeist of this market, if you really want to get it, these two types of chips tell you a great deal of the drama going on in the stock market and in the entire country. So in good day with the Dalvids, 130 points as it became 1.03%. And as I jump 1.51%, allow me to explain, let's start with these chips, the semiconductors, OK? Right now, there's a veritable feeding frenzy for the chip makers. Investors can't eat just one. The SMH, the chief semiconductor ETF, is just going crazy. Buyers are chowing down on this stuff like piranhas and the Amazon base. The darn SMH is up nearly 34% year to date with more than 180% from its lows in the big bottom of October of 2022. Meanwhile, NVIDIA, obviously the undisputed leader of the group, is up 87% year to date. And 757 from its lows, just 17 months ago. 757% people. On the other hand, though, this bag of chips is under assault. The price of a bag of potato chips has risen 45% while the cost of producing them has increased by about 40% over the last few years. But unlike semiconductors, potato chips haven't gotten any better over that period. Same product, much higher price. The first, NVIDIA, has gone up so much that if you owned its stock, you wouldn't know the difference between the cost of this bag of generic chips and some name brand lays. These prices would mean nothing to you. That's the beauty of investing well. But for most Americans, they can invest well. Because the cost is everything. Food costs are at the heart of the dilemma facing Americans. You have to eat and eatings a lot more expensive than it used to be. The pandemic led to a level of price increases that we hadn't seen in decades. Back in 2019, there's a good example. Basket of food costs $156. Now it's 210. Most Americans don't have enough spare money to buy a share of NVIDIA, for heaven's sake. 36% of Americans have more credit card debt than emergency savings. Another 19% of less than $1,000 in savings all together. Putting it all together, only 45% of Americans have more than $1,000 in savings. Well, it's not much left after buying an NVIDIA piece of stock as it let alone a chip. We'll get it in that in a second. What they make goes to shelter, which is a big. They make goes to gasoline. Of course, it's not that big, but a power, which is holding in. Food, though, is disastrous. And if you're eating store-brand potato chips, you probably can't invest in microchips. But for the haves, what can I say? I've been investing for 45 years. It's difficult for me to find an analog that can even rival this moment. Sure, there were peers when Texas Instruments led this market in the '80s. There were loan stretches when you had to own Intel in the '90s because it was unstoppable. In the end, there might have been a chip that could ignite an AMD or a model of the memories of the old national semi, but nothing like NVIDIA. Maybe the personal computer revolution comes close, but not of late. See, the contrast between the haves and the have-nots I find is disconcerting, and I hope you do, too. The cost of food is sapping the average consumer, and it seems like no one has the ability to do anything about it. Yes, Costco reported tonight in a fantastic retailer is trying to hold the line on pricing using their signature Kirkland brand. It's working, at least, for a club member. Now, the stock is off after hours, but there's nothing really significant to explain that other than the fact that what we call two came to out into the print, or the quarterly results. Remember, they report every other every month, so there's no surprise by the last month. Now, Kroger, though, reported this morning. This supermarket stock led the S&P 500 because they've been cutting prices, where they've been introducing their own private label brands. They're going to do 800 new private label brands this year. That's how you keep costs down. Cost down. Meanwhile, endless versions of personalization, digitalization, are causing sales to go up while bolstering their margins. Walmart's actually keeping tabs on suppliers, and wants to keep prices the same. But try as the great retailers are doing, and they are trying. They can't get prices back to pre-pandemic levels, it's just not working. Now, the presence you may hang in the balance of this bag of chips and food that surrounds them in the grocery house, even though we've got low unemployment voters really, really hate inflation. Well, in this group of chips, the ones that are so abstruced and cut your hands if you're not careful, these guys, well, let me tell you something. These are what we call chips for the enterprise. Right now, the enterprise, which are corporations, is the place to be. Thanks to higher register, it's the end of additional food stamp aid, and the resumption of student loan payments, the consumer's loyal, totally strapped, they really are, mood is grim, it's registered. But the enterprise hold different story. Consider the semiconductor, at least chips are incredibly expensive, but they deliver businesses such a big return. One investment that makes them addictive. Now, one Instagram, recently, Mark Zuckerberg, let you know that he can't just eat one. He said metal will have 350,000 super high in NVIDIA H100 graphics processing units, and the computing power equivalent of 600,000 by the end of the year. A single H100 chip costs over $40,000. Most Americans need to be careful about how many potato chips they could afford, or they wouldn't be buying these knock-offs, right? Now, the ironic comparisons don't really stop there. I mean, no, it's a little bit of a dramatic license I want to take, but what's really driving the demand for the NVIDIA H100s? Generative artificial intelligence. But she used to think and accelerate a computing, which allows these thinking machines to work at lightning speed. We didn't know all that much about these twin concepts until the orders started flowing into NVIDIA. Right about the same time that many discovered the wonder that was chat GPT, GPT. That's driving the prices up, but how about potato chips? The only thing you can drive these chips down in price, other than the furious temps to hold the line by Costco Walmart and Kroger, the new class of weight loss drugs known as GLP. GLP-1, GPT, GLP. GLP-1 is made by Novo Nordesky, like look, if you're gonna afford these drugs, you'll get your insurance to pay for them, then you really can't stop. It's just one potato chip. If you need them at all, go right by that aisle, not interested. You need to think of the GLP-1s as willpower enhancers with a secret weapon. They make really great, tasty things kind of taste blah. Yesterday, brown formers, Jack Daniels, had real bad numbers. Like every other company challenged by GPT-1s, brown forma claims the new class of drugs didn't do any. I don't know about this point, I find it hard to believe. The truth is, whatever you imagine a jack-and-coke would taste like after a hard day of work, just imagine you're drinking some brown bubbly soda water, and it's expensive, because that's what it feels like when you're on GPT-1s. No wonder people don't want to pay 10 bucks and change for a privilege to drink it. By the same token, potato chips just don't beckon when you're on these drugs. They practically eliminate cravings for junk food and alcohol. If enough people take these drugs, then the chips die on the aisle, the price comes down. The GLP-1s are the accidental price cutters. Look, you're watching this show, which means you might have bought some damn video, or some AMD, or some brookom, which indeed is trading down in and after hours, after a good quarter, but lighter than expected revenues, and no boost to the full year outlook. You might get a good chance to buy some brookom next week, you probably want to do it. Remember, the club will tell you everything. Maybe one day the productivity gains we get from these microchips will make potato chips more affordable. Maybe the GPT-1s can team up with the GLP-1s, create some wealth that can be saved. But right now, the bottom line is that the paths of the people who invest in the microchips, or the enterprises that buy them, are very different from the paths of people buying knockoff potato chips. And perhaps never the tweens shall meet, at least unless something big changes, and I've got to tell you, my crystal ball, you can't see that far. I'm gonna go to Isaac in Utah, Isaac. - Hi, Jim. So, thanks for your time, first of all. I'm the founder of the Kramer Double Inverse Fan Account. That's on Facebook and Instagram. And my question for you is, do you think General Electric will continue to outperform its industry, yes or no? - Yes, I mean, a nice conversation with Larry Cope all the time, including today. And I think that you saw what happened when they announced it, it's up in another seven, 52 week high, an extraordinary performance by Larry. And yes, now, in Canada, I have to say, I disclose, I worked for GE and I have GE stocks. So I don't want people to say, "I'm going nuts for Larry Cope, but man, is he good." And that stock goes higher. I want to go to Rose and Pennsylvania Rose. - Hey, Jim, from your old hometown, Billy. - Fantastic. - I have a question about micron. I have a small position and I was thinking about adding to it. It seems to sort of not go up as fast as some of the others. And I just wanted your expert wisdom and insight into if there's anything in the company that I might be missing. - Okay, I've studied micron over the years and I think that Sergeant Roger would say that I am as good a student in micron. I'm not university, is anybody else he's ever met? And when you have these moves like micron, they tend to last for about 18 months and they go much further than they have already. I don't want you to buy it into the scrum that was up today, but I do think you can get that stock in the mid '90s to high '80s and I want you to pull the trigger immediately and buy some more. Let's go to Ted Walsh in Washington. - Hi, Jim, Booyah. - Booyah. - Just wondering, Jim, we've had Starbucks since day one back in the '80s. Of course, it split many times, two or three years ago when Howard Schultz left, it was 124. Today it closed at $90. - She did. - What is your professional opinion, Jim? - Okay, Lucksman Narasimman is the CEO. He's been doing a very good job. He actually gave some talks in New York. In the last couple of days, I've heard what he had to say. I think the big problem is twofold. One is that China is just really, really tough right now. I don't know when that's going to be able to wake up from in Slumberton. Two, there were some protests at his companies. At the company's stores that I think were ill-founded, but they happened and that hurt domestic. So domestic, not great, and China, not great. And that's producing a $90 stock, which to me says, but because neither one of them is going to stay like that. That's what we're doing to the trust, pick some up. Let's go to Robert, New York, Robert. - Hey, Jim, I gotta tell you, you continue to steer us in the right direction. You saved me over $50,000 in the last seven days, okay? And you did it, Viking. You said Viking is not the one that came out with this, that NCO, blah, blah, blah, blah. I pulled the money off the table. You saved me, I made a ton of money on it. - Oh thank you, I just, I liked it. - When I see too much enthusiasm, I do want to pull back. I look, I told club members today, I wish Broadcom hadn't run up into the quarter. I don't like that endless enthusiasm. Viking had way too much enthusiasm. It was too hot, had to take the profit. How can I help you now? - Exactly, we never, we never messed up when we listen to you and I hope you're around forever. - No, I make a lot of, look, I make, I just try to make fewer mistakes that I do good ideas. - Well, let me do it, thank you. - Keep doing it, Jimbo. - I will, I'm not going anywhere, anyone think I'm going anywhere? - No, no, no, I'm not going anywhere. - I do the show Saturday, just nobody tapes it. What's up? - Well, okay, anyway, the average price target that is stuck that I'd like to talk about is $173. This is based upon 23 Wall Street analysts with 12-month price targets. The highest analyst is staying with 263, the lowest is 75. So you got this, this, this company, I own it at about 25. I'm not going to tell you, I'm, don't say I'm a pig, but I'm not passionate. But should we cash in our coins on Coinbase? - Okay, look, I think Coinbase is in a unique position. A lot of people are shorted. People didn't think that the SEC would find a way to actually just look the other way when it came to the ETFs. There's going to be an Ethereum ETF. I would not sell this until the day of the Ethereum TTF. When that ETF starts, I think you're going to get a good price. And that may be where you want to unload something. No, this is momentum stock that's heavily shorted. I kind of, for people who are aggressive, it's a real good situation. All right, the paths of the people who invest in these microchips are on a very different path from those who are buying these who are knock off potato juice. And sadly, the two probably will never meet unless something big changes. I'm sure where she could, but I don't control that. - Maybody tell you, the fortune brands, the company behind Moen and Master Lock, has its figure on the pulse of the US home repair remodel market. I'm heading, I mean, let's hear what we have to say, because that market's been stole by high rates. And then from home fixtures to home building, I'm also learning more about fellow wood deck from AZAC, on how the company's able to turn it in and stuff. Really, pretty good top and bottom of my vehicle's decking is something that is still selling real well. Hey, by the way, stay tuned, gap important to the bell. I'm with the new CEO at the helm. How is this company fairing? Oh, man, you're not gonna miss. Well, I think it's gonna be a blockbuster story. So stay with Kramer. (upbeat music) - Don't miss a second of Mad Money. Follow @ChimCramer on X. Have a question? Tweet Kramer, #MadMensions. Send Jim an email to madmoney@cnbc.com or give us a call at 1-800-743-cnbc. Miss something? Head to madmoney.cnbc.com. - Resourceful small business owners know how to get value from the purchases they already make for their businesses each month. The Enhanced American Express Business Gold Card is designed to take your business further. 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Inside you'll find institutional quality expertise from a specialized team with deep derivatives experience. Get to know what's inside PAPI, the symbol of alternative income at eatinvans.com/cnbc. Before investing, prospective investors should carefully consider the investment objectives, risks, charges and expenses The current prospectus contains this and other information and is available at eatinvans.com. Read the prospectus carefully before investing. Not FDIC insured, offer no bank guarantee, may lose value, not insured by any federal government agency, not a deposit. Investments involve risk, principal loss is possible. Distributed by four-side fund services LLC. (upbeat music) How do we feel about everything connected to housing? Now that it's crystal clear, we won't be getting anything close to those half dozen rate hikes that much of Wall Street was expecting just a couple months ago. Take fortune brands and innovations, that's formerly known as Fortune Brands Home and Security, which makes water fixtures like the highest and fully automated, gorgeous fossils, premium doors, composite decking prices, all sorts of locks and various other security products. Here's just talking about 33% last year with the entire game coming just today, November, December, after long-term interest rates finally started coming down. Yeah, Decent starts at 2024, up 6.7% year-day. Let's suddenly lag in the broader market now. Well, and partly as we don't know how quickly rates are gonna come down. When Fortune Brands and innovations reported at the end of January, they gave you a solid top and bottom line beat with a healthy, full year forecast. And this is what's really important, extremely robust cash flow. But management's earnings guidance for the current quarter came in light, spooked people, I don't know, was down 4% the next day. Turned, rebounded, of course, since then. So what do we do with it now? Let's check in with Nick Fink. He's the CEO of Fortune Brands and Innovations to get a battery in the situation. Mr. Fink, welcome back to Bad Money. Thank you, thanks for having me. Thanks, Nick. If you had told me that you could do this level of business with rates going up, giganticly, and still have this free cash flow and buy back a ton of stock, I would've said it's impossible. How are you doing? Well, firstly, the market is a lot better than people give it credit for. So you had the biggest affordability crunch in 50 years, in 50 years, and consumers still stuck around, right? It's great. And you started through the home builders, building more houses, people are buying the houses. And so there's been a resilience, but then inside of that, we focused on our own transformation and really looking for the parts of the market that had what we call supercharged growth, right? Well, you've shuffled the portfolio and you gave out fours and six of spades and you got back with kings and queens at aces. And one of the things that I thought was so incredible, in what are innovations? You are now, really, you dominate. And you dominate in a way that's good for people, good for earth, good for the workers. And I think you should just talk about that 'cause it's very rarely you'll ever see a CEO just say we've got a product and it's good for everybody. Yeah, it's the coolest thing and it gets me out of bed every day. So, we've taken something that was a shower head and faucet business and we've turned it into a whole home residential water management business. And it starts with our AI powered product. You and I've talked about that in the past. It's not just AI yesterday. We've been doing this for about four or five years, but it can read water throughout your whole house. It can shut off your main if you're gonna have a catastrophic leak, completely save your house, save it from being damaged, save it from mold, and then use a whole ecosystem of products around it to make it even better. It's a game changer, but at your point, those leaks cost our planet, not just water, but a ton of carbon. And we're gonna put an end to that. And I think that people are starting to realize if you bought a nice house because the times were gluten rates were low, it's worth it to think, oh my, there's going to be a vicious cold snap like we had in Kansas City, minus nine, and your house is going to just be destroyed. - We saw exponential growth through the Southeast, places like Texas with those bursts in January. Huge growth and interest, the online conversation. So you've seen consumers get there. - But now outdoors, there seems to be a little more sensitivity to rates. I mean, when you have those really premium doors, really premium decking, it seems like it puts pause for a moment that repair and renovation, people are pausing a little bit clearer. I would have thought by another way to say, you know what, I have to stay in this house forever because I have a low mortgage rate. It's time for my place to look better. Will that happen? - Right, you saw a bit of a lag, and particularly also, that's a fairly big new construction business, and so you saw more of a dip and then a bump back, and then you're right, R&R's been a little bit slow to come back, and you know, but we're seeing it sequentially get better, a month on month before our quarter, and I suspect by the time we get to the end of this year, you're gonna see it back to a very healthy long-term growth, right, a three and a half to five months. - Right, now you obviously have conviction because you take that free cash flow, and the stock is after a good run, but it's gonna be paused because you do have, obviously, connection rates. It seems like you're buying as much as you can. Why? - We're in there because we think there's huge value, and we're very strategic about it, we're very disciplined, we look at our strap plan, we look at historic multiples, and we decide if there's value to be had in the stock, we go in and we do it, and there is. - You had to have been surprised, like the rest of the world, that the Chinese real estate market would basically, in our terms, crash. Now it's only what's 7%, but it can still hurt. - Yeah, what happens there? - I think that changes from what's been a new construction led market to an R&R market, and overly developer led for many, many, many years, and now those cities are getting old, and our shares really concentrated in the big cities, and so as they get older, we're seeing growth in the R&R channel, and our team's done a great job of giving that business as profitable as the rest of the company, and managing through the downturn, so it's great optionality for the future. - Oh, yeah, it's not, I never thought at one point that I saw you this summer that I'd have to start hearing about Red Sea, Cape Ford, I mean, no, you have to worry about where you get your products, and it did add your cost, correct? - Well, it added to inventory, so we put about 10 days more inventory on the water, just to be safe, taking care of customers and consumers, number one priority, I expect that'll come out by the end of the year, but we just wanna be cautious, and you do learn with the complex business, we have inventory all over the world, moving all the time. - Now, I was struck by, I thought that you would be doing more by this point in security, because you have a trusted brand, and if you have a trusted brand, we use sentry fridges, you can put that on anything, and we'll take it, because we know that it seems like you could, nuclear war doesn't take that stuff out. - How concentrated do you wanna be in that particular vertical? - Look, I think the right parts is security, and so we closed on a great acquisition in June, which was Yale and August for the US and Canada, and now we're in the process of bringing that business together, but the real unlock, it was for us to get our hands on that team, and their connected product know-how, and so as we bring that whole business together, with the help of that team, it gives us a lot more optionality to look for really, really good parts of that market to add on in the future. - A lot of people tell me they're always looking for little acquisitions, do you guys are in the market all the time for, now you just wanna go higher and higher end, is that the trick? - It's gotta be a brand, right? It's gotta be a brand that's innovation led, that's gotta moat around it, that consumers are willing to pay for, and that we can innovate behind. - Well, you've done a remarkable job, the great last year, this year starting much better than what you could expect given rates, and I understand why you're buying the stock, it's the right thing to do. That's Nick Fink, he's the CEO of Portion Brand's Innovations, terrific stock, had him own last May, it's been a great one, made by his back-end for the first. (upbeat music) - Coming up, making the outdoors feel more like yours, he's a sunny season approaching, Kramer has a patio player on deck, keep it here. 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(upbeat music) - As you know, today we're taking a hard look at the building product space, but I've got a bunch of stocks that have been running just as hard as the home builders. Consider the case of AZ, which makes composite material products that are used as an alternative to wood. It makes for great decking that requires far less maintenance as I know, 'cause I'm all AZ. Just a few weeks ago, AZ turned into a present quarter, top and bottom line deep, with management raising their full year forecast, stocks dropped more than 14% out of the news. Can you hear the climb? Sell up almost 30% for the year. It's okay to keep running, let's think people with Jesse Singh, he's the president CEO of AZ to learn more. Mr Singh, welcome back to Bit of Money. - So great to be here. Thanks, Jim. - Jesse, I'm so glad you're here. We talk so much about tech on the show. Because people think that tech can be up 40, 50% in a year. - I think that you're up almost 100% since we saw you last. - Yeah. - How'd that happen? - Well, first, if you just step back and look at our business between our timber tech brand and our AZAC brand, we built a business over a long period of time. Our 10-year CAGR is 12%. And our focus has been on long-term performance, and there's times when the market recognizes that performance, and we're clearly happy with the progress, but we think there's a long runway ahead of us. - But if you told me that a building product company was going to have the worst rate-taking cycle in history and that you were going to have these kinds of numbers, I'd say, that's just not possible. You've got some sort of secret sauce going here. - Yeah, I mean, so if you take a look at our markets, the vast majority of our markets are wood. And so for us, we plan a market that is actually four times the size. So we're constantly converting wood into our types of decking or exteriors, and that's always an additive growth element. So in almost any cycle, we tend to be very, very resilient. If you look at our calendar year performance in 2022, we grew 4%. And last year in 2023, we grew 10%. So there's a resilience here that's just long-term, and we expect to continue. - Why is repair and renovation so much better in the decking of repair and renovation the best, most solid growth of anything to do with the house? How'd that happen? - Yeah, well, first, there's been a long-term focus on the outside of the home. People have started to look over the last decade at their square footage, and it's a terrific opportunity to expand square footage. And in our particular case, as I said, it's a very resilient sector, but between new products and constantly converting the market and expanding the market, we're able to sustain those double-digit growth. - Well, let's be resilient. This is before I met you, but it's something we told you. I had to do my short place every five years, and I haven't done it in a very, very long time, because I switched to this asic. The guy told me, "Jim, why keep using wood?" The wood proposition is something that's in our heads. I think when I heard how much is recycled, then I feel better, but then when I heard how much is flame, that it doesn't propagate flame. I said, "This is best. "Everyone should get an insurance break "if they use your stuff." - Yeah, I mean, one of the key characteristics, we've got a proprietary line that's made out of recycled PVC, 60% PVC. One of the benefits of that product is it looks like exotic hardwoods. It's almost indistinguishable. I think it's the product you have down. - Yes. - One of the side characteristics of that is its class A flame spread. So it meets certain incredibly high standards of not propagating flame, which of course, in a lot of geographies, you think about embers floating from a fire, it will not propagate that flame. And so we're seeing really nice growth in those areas that want high aesthetics, which we provide environmental sustainability, and then also the ability to really make the house safer from potential fires. - Well, you and I know that nothing sells itself. You got these 200, you got a great sales force. But it seems like wherever you go, you seem to take share from the big boxes, from all the stores. It's almost as if, when I first met you, that you went from, didn't have a big chunk of these big places, but now you're the guy. - Yeah, we have, we've, we play in two channels, the pro channel and the big boxes, as you said, and the DIY channel. Because we've got such a great value proposition, those 200 salespeople focused on contractors at differentiated product. We've been able to continue to expand our position both in the pro channel, think of builders first source, those kinds of companies and with the retailers. And so it really comes down to servicing the customer better and both those channels, recognizing that we've got a differentiated product. - It does. I know you, I just added, you added some space in up, Aliquipa in your Pittsburgh, and someone on the conference call said, "Well, wait a second, Trex has got a huge capacity coming on." That didn't seem to phase you at all, did it? - We, over the last couple of years, both of us have added a lot of capacity. We tend to operate on focusing in on value. That capacity is necessary for us to continue to expand the business. So the fact that more capacity is coming online, to us is an indication of just the future trajectory. And then the capacity we added in Pittsburgh is really to focus on a wood look type siding that starts in an adjacency for us where we can convert cedar to our types of materials. And so part of our expansion play is, through the ASAC brand, moving into adjacencies, including really specialty siding. - Now, you're also finance guy. You brought back a huge amount of stock. You've got a great reputation for being doing when the stock is low. You put the money when the stock's low, you'll buy the stock, but as it goes up, obviously you're looking for opportunities. Well, what a chart. What's next at these levels? What's the right thing to do? - Yeah, we throw off a lot of cash. If you just look at our balance sheet and where we're going, we should have a reasonable amount of cash at the end of the year. As you mentioned, we took out about 7% of our shares in the last two years. We would expect to continue that process of using our capital to continue to buy. We expect the stock to go up. And then we are selectively going to use that capital to reinvest in the business, do tuck in acquisitions. And if necessary, continue to make the balance sheet better by getting rid of some expensive debt. So we've got a lot of capacity to do a lot of things with that cap. - Good for your house, good for the plant, good for the shareholders, not bad, Jesse. Thank you so much. - Jesse Singh, president CEO of ASIC. I urge you to look at this stuff and the end of the stock. I mean, I couldn't believe it. And I did not know the guy. I was like one of those satisfied customers. I should have bought the company. Everybody's back there for the break. Great, thanks. (upbeat music) - I'm a sucker for a good comeback story. And comeback stories don't get much better than what we are seeing right now from the gap. After just over six months of new management, this company's looking stronger than it has in ages. Yep, after languishing for years, the gap brought in Richard Dixon, formerly Mattel, as his new CEO. He took over in August. And by November, he already delivered a much better than a period quarter. If at the same time, wasn't sure how much it became down to new management. But tonight, gap reported again, this time it's clear we're seeing a genuine turnaround. A couple of you are reporting 9 cents per share. And I was looking for 23 cents, along with higher than expected revenue in flat same store sales. Most of us are going to be down. I love the gross margin story here too. Even before the quarter, stock was already up 88% since Dixon took over. And now it's moving higher again after hours trading. So how the heck did this happen? How could he pull it off? We got to know more about this story. Let's take a closer with Richard Dixon. He's the new CEO of the gap. Find out more about the quarter and what comes next. Mr. Dixon, congrats to the quarter and welcome to Mad Money. - Thank you, Jim. It's good to be here. - Well, I got a temperature. Your reputation procedure I spoke to you on cries. Mattel loves you. I knew the guys at Jones. They thought you did a great job. But I want to say, from your first coffee school, you seem to be enjoying yourself in a job where I have to tell you, other people felt they were toily in a factory. - Come on, it's fashion. Fashion is fun. It's entertainment. We mean so much in the world. Our brands are recognized around the world. It's a storied company. It's an incredible opportunity. And I am having a lot of fun. - Now, you're starting out correctly, I think, with your priorities. Maintaining and delivering financial and operational rigor, because that's what I was most worried about. I was afraid to recommend this stock, as I said, who knows? Maybe the cash disappears. You went the other way. That was your first before you even got to energizing culture and strengthening platform and taking the brands better. - Yeah, well, look, you know, at the quarter shows the results of that. We exceeded expectations, both top line and bottom line. We gained market share, and all of this has been driven by the strength in our two largest brands. But the efforts that we're making in operational and financial rigor, that's what's showing up in the numbers. We expanded our gross margin by 530 basis points, operating margin by 570 points. Our inventory is down 16% versus last year. So we're starting 2024 with a great inventory composition and new energy. We closed the year on strong financial footing. We're just under $2 billion in cash on the balance sheet. And we're entering with renewed energy on the reinvigoration of our brands. But we're going to continue to operate with discipline against strategic priorities, operational and financial rigor. And that's what's going to enable us to really reinvigorate this incredible portfolio. - And I think that helps you get someone like Zach Posen. I mean, when I mentioned that Zach Posen would cap the first thing people say to me is, oh, give me a break. And then they say, hold it, just a second. I saw the ads, I see the lid and I let the look. So when you're attracting people that you would, maybe the old people couldn't attract. - Listen, this company is a magnet for talent. These are legendary brands. And Zach Posen is one of America's most celebrated designers. Zach's creative expertise is cultural clarity. It's consistently evolved American fashion. And as he gets more immersed in the business, his influence will be considered really carefully. And the continuity of our brand reinvigoration will be a lot about creativity, design and cultural relevance. We are thrilled with Zach and there's lots of incredible talent at this company. Just being unlocked and incredibly excited about the future. - Now when you say you're taking share, say, for GAP, who is it coming from? You don't have to necessarily pick out a company, but I'm trying to figure out, 'cause in the old days, I remember one of this, one of your CEOs said, hey, we've got great data. So we're gonna take share from XYZ. It never happened, 'cause the data didn't, data wasn't fun. It's great to have, but it wasn't fun. You're winning from some people who are they dialed, he places, places that have lost their way, because it's really remarkable to share take here. - Look, I think GAP is a great story to spend a little time on. I mean, we've been reigniting this brand and drawing on what the brand was so special in the first place, really taking on-trend products and amplifying it in new ways that only GAP can. We're using music, we're using fashion as entertainment, and we're taking basic product, linen, denim, wovens, pants, and we're amplifying the narrative around these categories and driving share growth. Ultimately, kids and baby, it's an incredible category for us, underrated in the context of its recognition, and we have incredible strength. Old Navy is the number one kids and baby brand in the US. GAP ink owns nearly 9% of the market. We've got incredible proven capabilities that resonate in this category and others, and it's our opportunity to continue to accelerate, becoming an even more important player in this segment. Denim, active, we've got enormous opportunity with our capabilities. - I know those are so huge that you can't even bother, I guess, to focus right now. I know you've got an island, Banana Republic. I was at your Silicon Valley store outside of Bethlehem, and it was just gorgeous. Everything was gorgeous. Prices were good, the people were fine. I mean, I did a major shop there. And yet, at the same time, I know that you're not even really starting it yet. You could make that into one hell of a brand. - I love it. I'm glad you're a fan. It is a great brand. It's also, by the way, a sizable brand. This is nearly $2 billion with scale. It's got a competitive footprint that represents a particular opportunity within our portfolio, broad-based consumer in the premium space, but really valuing style, luxury fabrics at great prices. The look of the brand, as you see, it could take you from adventure, travel, office, evening out. The brand's aesthetic, as we've dialed this up, it's headed in the right direction. It's gonna take some time to re-establish the brand's momentum. The team that we have is working really hard to strengthen the fundamentals. As I've said, many times internally, retail is detail, and we need to drive more consistent results, strengthening the fundamentals, but it is a great brand waiting to be unlocked for the future. Excellent. Now, I made a mistake recently, Richard, for one of my wife's 52 birthdays that she's had in the last year. I went into the site she in, and it is taboo. Now, of course, I think they're sending me everything just to flood the zone. But these are problems. I mean, they're, we're back at a landfill bill. I thought we got away from landfill bill. Gap is a much higher brand than landfill, but these guys have got price points that are ridiculous. Yeah, look, the apparel industry is a competitive one. It's cutthroat. We have iconic brands. We have a strong store footprint with a number two e-commerce platform, apparel business in the country. We have incredible heritage. We have a tremendous opportunity by ourselves to reinvigorate these brands. We react to trends quickly, but we're not fast fashion. Good. You know, our commitment. Our commitment's to deliver style, quality, and value. And as a house of iconic brands, we take great pride in the trust that we build with customers who come to us for value and our values. All right, well, let's leave. We have a lot of it. I'm sorry, go ahead. Go ahead. Finish up, I'm sorry. I was gonna say, look, we have a legacy, a gap of creating positive impact in the communities that we operate in. Not just what we do, Jim, but how we do it. We take great pride in our purpose and our promise. I'm a believer. What can I tell you? I'm a believer. I'm a believer. I'm a believer. I'm a believer. I'm a believer. You are real. All right, that's Richard Dickson, President and CEO of Gap. Richard, that you were coming to him is certainly a major turn for a story, a group of stores that we all want to win. And everybody's back after the break. It is time. It's time for the Lightroom Conservancy. It's time for the Lightroom Conservancy. It's time for the Lightroom Conservancy. It's time for the Lightroom Conservancy. It's time for the Lightroom Conservancy. It's time for the Lightroom Conservancy. It's time for the Lightroom Conservancy. It's time for the Lightroom Conservancy. Let's start with the ball in California. It's the ball. Hey, Jim. We are from Tennessee, California. How are you? I am good. How are you? Thank you, Preston, Father, but I've been listening to you. Thanks a lot for sharing all the wisdom. Thank you. Thank you very much. My question today is about a social media management firm, market cap about $3.3 billion. Revenue last quarter or 24 was up, 34% from the title quarter. And it's SPT, social. You know, I have to look at that comfy, be honest, because that's in a hot spot, but the stock is not making money. And because the company's not making money, I have said no, but that doesn't mean I can be totally close minded because there's supposed to have an earnings breakout. Let me give them a word. Let's go to Joanna in California, Joanna. Joanna. Hello. Hi, it's Jim. You got him. What's up? Oh, hi, Jim. Puyah. Puyah. Thanks for taking my call. Lucky it's Puyah. Of course. So by the way, my boyfriend, he's been having fun of you. And for years it made me fascinated about your show. So what do you think about mankind? Is it about that? Well, you know, it's funny. Man, can I join us? One of those who's been hanging out there forever and just finally starting to look like it's gonna have an earnings breakout. But I am one of those people who's joined us about it. I've got to wait to see if they can come up with something. I just can't go in and say, you know what? Looking better. I'm not gonna go there. Are you gonna go to Edwin and Georgia, please? Edwin. Hey, how you doing, Jim? 21 years, listen to you. And a big bulldog for you. Oh, fantastic. Thank you for watching. What's going on? I've got a question about why your platform, how you feel about that at 11, buying that, or getting in at 11? Look, if I want a Bitcoin miner, I'd rather just own Bitcoin, okay? Now there are, or the Ethereum ETF that's gonna be coming. Either one of those think you're superior to buying Riot platforms. Let's go to Jeffrey in Massachusetts. Jeffrey. How you doing, Jim? I'm doing good. How are you, Jeffrey? So, I'm calling tonight about Dutch Bros. Are there gonna be a perk key to E, or do we wait for a trip? I've been doing a lot of work on Dutch Bros, thinking that they just had that big offering, and the place held. This stock did not break down. That said to me that maybe Dutch Bros is finally turning. They over-expanded. I was upset that they did that, 'cause it's such a good brand. They seem to have gotten a little more religion. They're slowing things down, and that is gonna make it so it's a stock don't. I need to go to Berlin, in California, Bill. Hey, good morning, my afternoon. Hey, Bill, what's up? Oh, not much, Jimmy. I'm looking at the name Transulsion. Ray? Two down and now. You know what? I've been around the, I've just been around the oil patch too long, to know that if you're gonna buy anybody in that space, you're either gonna have to buy SLB, the old Summer J, or you're gonna buy Halberd, or you're gonna buy nobody. And that's really simple as it comes. How 'bout Craig and Florida, Craig? You need to Craig in the sunshine today? Good evening, sir. Oh, babe, how are you in the Southland? What's happening? - Jim, this is the third time I'm calling in about this name in the best year and a half. I know how you feel about it in the CEO, and at this point, none of us are interested in how much from 4 to 8 inside of a year anymore. We're tired of hearing how great this company is doing, and it's never traded over 5 to 8, even in this Reagan bull market. 25 years of investing, I've never seen a growth story. It's so strong and perfect, and it stops the age so weak. I'm asking you to have a very large community of committed, fed up retail care holders who have just about had it. Then please get Mr. Noto on your show to re-inspire his bullish, so far, shareholders. So far, okay, well, what happened is that the stock ran, and it did this one and a quarter convertible senior note, and it crushed the stock. I don't blame the people wanting to have that money at that price, but that's what hurt it, sir, and I still believe. And that, ladies and gentlemen, is the conclusion of the lightning round. The lightning round is sponsored by Charles Schwab. Horse races are a given in this business, but you can't get too caught up in the racetrack if you're trying to make big money. Just wondering if you learned that Novo and Nordis, the giant Danish pharmaceutical company, may have passed Eli Lilly in the race to develop a pill version of the revolutionary weight loss drugs, right now these GOP dash ones, are all injections. We've always been working on a pill too, known as or for a glip-bron, and this pill caused patients to lose 78% of the body weight after 12 weeks, seven days up ahead. Not as strong as the injectable version, but a major advance for anyone who doesn't want to take a shot every week. Today, though, we've found out that Novo and Nordis pill emocentric is clearly superior, with an average of 13.1% weight loss after 12 weeks. Not bad, huh? And so far, it's been both safe and well tolerated. Of course, it'll be several years before either of these pills hit the market. More important, though, armchair students of this horse race, know that Lilly's been pretty tight-lipped about what it's working on, but I have to believe they're not far away from a pill that can offer similar levels of weight loss. Still, there's an obvious question. We own Lilly for the travel trust, so why don't you sell it and swap it in Novo and Nordis but it's in the news, right? First, the GOP dash ones may be the biggest drug category in history, and there's room for both companies. Second, what may matter, the most right now, isn't necessarily the actual particulars of the drug as the production capacity to make it. Lilly has much deeper pockets than Novo, and it's pouring money into big factories around the world in order to meet the man. So far, Novo's lied. Third, the doctors writing prescriptions for these GOP dash one drugs seem pretty agnostic about the shots. They treat them as almost interchangeable. You just try to get what's available. The Novo pill might be the holy grill, something far superior to what Lilly has in the works, but the odds don't favor that. There's plenty of room for both companies, but at the moment, we want to own the company with the production capacity, not the one that might have an ephemeral lead in the GOP dash one pill development horse race. Just consider this, Lilly's zep-bound shot is why they consider to have a better weight loss profile than Novo's Maccovey, also known as Osempic. That's the most important criteria right now. Yet again, doctors seem to treat them as interchangeable while they're supposed to swap it now out of Novo, and Lilly doesn't look like that. Of course, our horse race is all over the place. Takes cybersecurity where it's Palo Alto Networks, which gave disappointing guidance versus CrowdStrike on last night, which gave you a clean beat and race that sent it stock into the stratosphere yesterday. Now, Palo Alto's Nikeshwar has taken a traditional somewhat pedestrian firewall company, partially through acquisitions, transforming to something that can give customers a soup to nut cybersecurity offering. Meanwhile, George Kurzmann from CrowdStrike says his technology is best in class, while offering a lower cost of ownership and a seamless installation. Palo Alto's platformizing, making sure that all your security base is recovered. So is CrowdStrike ahead of Palo Alto right now? Well, the stocks say absolutely it is. CrowdStrike's been the better bet in recent months. But you know what? The cybersecurity world, it's colossal. With more hackers than we ever imagined a few years ago, and I think Palo Alto can come back with something competitive to what CrowdStrike's offering right now. Look, they're both run by very, very smart people. They both can pivot and make changes. Is the old firewall business that Palo Alto was built on in steep decline? It sure seems like it. However, Benny has to catch the worries, but it's soccer's game. Do I wish we own CrowdStrike instead of Palo Alto for the challenges right now? Of course! But only for this past month, because over the past three years, Palo Alto still have 157% CrowdStrike's only up 80%. You need to stay up in all these horse race situations, but resist the urge to believe that one contender can pull away from the competition for good. Right now, the jockey is just as important as the worst. George Kirsten and Kesha Roar are competitive CEOs great at what they do, and this industry is huge enough for the both of them. I like to say, there's always more markets somewhere. I promise I'd find it just for you right here, man. - Money, I'm Jim Kramer. See you tomorrow. Last course starts now. 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