Jim Cramer Likes Costco and Walmart

By Douglas A. McIntyre Published Apr 15, 9:15AM EDT

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CNBC’s Jim Cramer believes Costco Wholesale Corp. (NASDAQ: COST) and Walmart Inc. (NYSE: WMT) stocks have long-term strength.
These retailers have scale and fat margins, and they are largely domestic.

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Jim Cramer Likes Costco and Walmart — © J. Michael Jones / iStock Editorial via Getty Images

Jim Cramer believes that the swings in the market make it hard to find stocks that have long-term strength. Yet, he hasn’t given up on certain sectors.

On CNBC, Cramer named sectors he thinks will not be damaged by economics behind market fluctuations. At the top of his list are cybersecurity and health insurance. He also added two retailers to his list: Costco Wholesale Corp. (NASDAQ: COST | COST Price Prediction) and Walmart Inc. (NYSE: WMT).

Cramer told his “Mad Money” viewers, “I see several things the winners have in common. They don’t have a lot of competition. They’re largely domestic. They don’t need a strong economy. You can’t tariff them out of existence. They have scale, and most have fat margins.” He likes Walmart and Costco because of their size and the low prices of the items they sell.

As the S&P 500 has sold off by 4% in the past month, Walmart’s stock is up 11% and Costco’s has risen 8%. Walmart has 4,615 locations in the United States. It claims its store footprint is so large that 90% of Americans live within 10 miles of a Walmart location.

Promising Retailers

“You can’t tariff them out of existence.”

In the most recent quarter, Walmart’s revenue rose 4.1% to $180.6 billion. Operating income rose 8.3% to $7.9 billion. More important for investors, Walmart forecast that in the current year revenue would rise 3% to 4% and adjusted operating income would be up 3.5% to 5.5%. CEO Doug McMillon said, “We’ve learned how to manage through turbulent periods, especially these last couple of years, it has been one thing after the other.” He added that low prices would help its position in the retail market.

Costco has something no other retailer has. Its membership fees are small compared to retail sales, but they boost its margins. Membership fees are 2% of revenue but 73% of gross profits. In the most recently reported quarter, revenue was $62.5 billion, up from $57.3 billion in the same quarter the year before. Per-share earnings rose to $4.03 from $3.93. Costco has 617 locations in the United States and Puerto Rico.

Tariffs are bound to affect American retailers. Cramer thinks that there are two that remain promising.

The 10 Best Costcos on Earth

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.