After speaking with Hasbro CEO Brian Goldner on Monday, CNBC’s Jim Cramer was confident that “the worst is over” in the fallout from Toys R Us’ liquidation.
In the exclusive interview, Goldner said that while Hasbro doesn’t “have perfect clarity” on what will happen with Toys R Us’ non-U.S. business, the pain from its bankruptcy would not extend past the second quarter of the 2018 fiscal year.
“We held back some inventories across the entire retail channels in order to ensure our new initiatives weren’t caught up in the liquidation, and then we’ll begin to ship those as we move forward with great entertainment initiatives,” Goldner said. “We have the Avengers movie, we have our Black Panther home entertainment window, we have the new Solo movie coming in May, so it’s very exciting.”
“I am certain that, a year from now, we will not be talking about Toys R Us in this negative light,” the CEO added.
To Cramer, Goldner’s frank assessment of the situation as as good a sign as any that the brunt of the Toys R Us-related weakness was behind Hasbro.
“Does that necessarily mean that you should just go in hand over fist? I think if [Hasbro’s stock] came back to where it was, I would,” the “Mad Money” host said. “But you know what? Buying some Hasbro ahead of what could be a great second half may be the way you should focus on this stock.”
Cramer saw one narrative dominate Monday’s tape: that 10-year Treasury yields approaching 3 percent would send the stock market lower.
“But, honestly, I’m not sure interest rates are what we need to be super-worried about here,” Cramer said. “I think the bigger short-term worry here is a possible slowdown caused by new barriers to trade that we’re erecting with China now and perhaps many other countries later.”
He went on: “New barriers to trade are being imposed right when they can do the most damage to our economy by boosting inflation, which in turn will force the Federal Reserve to tighten faster than it might otherwise need to.”
Even though Cramer supported the United States’ push for better trade deals with China, he argued that the tariff battle was much more concerning than rising Treasury yields.
What a difference a week makes. Last Monday, Cramer told homegamers to stay away from the stock of Newell Brands, a household products maker embroiled in a proxy fight.
With Wall Street legend Carl Icahn on one side pushing for board seats and Jeff Smith’s Starboard Value on the other demanding an entirely new board of directors, Newell’s situation made its stock “the ultimate battleground,” Cramer said.
“Even though both Carl Icahn and the guys at Starboard [are] very smart, I told you that this seemed like a no-win situation to me,” Cramer reflected. “[But] the facts have changed, and like the late, great John Maynard Keynes, when the facts change, I change my mind.”
On Monday, Newell Brands and Starboard Value came to an agreement with Icahn’s approval, ending the proxy fight. Per the deal, Newell said it would appoint two new independent directors to its board in place of Icahn’s more controversial nominees and appoint a third Starboard-backed candidate.
“The stock market didn’t seem to care about this development,” Cramer said. “I thought it was a game-changer.”
Last week, Cramer watched the long-standing tobacco sector get obliterated as Wall Street sentiment on the space turned starkly negative.
Shares of key tobacco stocks dropped drastically on a combination of an Altria downgrade from Citigroup analyst Adam Spielman and a weak earnings report from Philip Morris International.
“We saw the market’s sudden recognition that the cigarette industry seems to be in serious trouble, disrupted by the rise of vaping,” the “Mad Money” host said on Monday.
“Over the course of three short days, the tobacco stocks were bent, they were spindled and they were mutilated by the realization that electronic cigarettes have become a serious threat to the old-school cigarette makers.”
Cramer was floored when he took a closer look at the earnings reports from consumer packaged goods makers Kimberly-Clark and Procter & Gamble.
The reports looked strong at first, but looking under the hood, Cramer was very concerned by the weakness he saw: Kimberly-Clark, for one, is facing pricing challenges, rising commodity costs and a slumping diaper business in what had once been its best growth market: China.
“Now, it would be one thing if these were company-specific issues unique to Kimberly-Clark. But Procter & Gamble said the same thing,” Cramer said. “Why is that so astonishing? Because this shouldn’t be a challenging quarter and the environment should be benign.”
With synchronized global growth, improving employment numbers around the world, and a more confident consumer, these companies should be reaping the benefits of these trends, Cramer said. Instead, structural changes are pushing prices lower while raw costs rise: a threatening equation.
“Historically, I’ve liked these stocks both for their dividends and their consistency through thick and thin. But that consistency is being undermined by the rise of online private-label goods and commodity issues that I don’t see going away,” the “Mad Money” host said.
“So while anything can bounce, I can’t, in good conscience, recommend either of these stocks,” he concluded. “The consumer packaged goods space, like tobacco, may be facing an existential crisis here, and as far as I know, at least with these managements, there’s no exit for them.”
In Cramer’s lightning round, he shared his take on some callers’ favorite stocks:
Nike: “You know what? Nike has had such huge executive turnover and the stock doesn’t come down. What happens when the turnover stops? Buy, buy, buy.”
Newtek Business Services: “I think that Newtek is a business development company that I don’t really understand, meaning that it’s opaque and I’m not going to recommend an opaque stock.”
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