Walmart Inc WMT appears to have proved Jim Cramer wrong.
The CNBC host questioned management's ability to execute last month following a guidance cut, but the stock is breaking out to three-month highs after the company signaled that inventory levels have peaked.
What To Know: Cramer put Walmart in the penalty box at the end of July after the retailer slashed its guidance on high inventory levels and continued inflation pressures.
"Inventory management is both the bane of existence and I'd say the high point of good managers ... I don't know if they've lost control of the situation," Cramer said at the time.
Everyone assumed that the inventory issues were widespread across retail, but Cramer suggested that Walmart may just be executing poorly. He argued that Walmart should have had enough of a read on its business to better manage inventory.
"This is not forgivable," Cramer said.
Walmart Results: Walmart shares jumped on earnings and have continued to trend higher Wednesday as analysts raise price targets on the stock after management indicated that inventory levels are improving as a result of aggressive pricing actions.
"We knew we needed to act quickly and aggressively in some categories, and we have. We've made good progress to reduce inventory levels where we focused and taken markdowns," Walmart CEO Doug McMillan said on the conference call.
Furthermore, CFO John Rainey indicated that inventory levels peaked last quarter.
"Importantly, the team has a deep understanding of our inventory levels and ... have made a lot of progress during the last quarter," Rainey said.
Why It Matters: When Cramer bashed Walmart management last month, he suggested the stock could continue to trade lower.
"Maybe someone is going to make a concerted case that this is your chance. I'm not making that case," Cramer said at the time.
It turns out that was a great buying opportunity — at least in the short term. Walmart shares were trading around $120 when Cramer questioned Walmart's control of the situation. The stock has trended higher since and just hit new three-month highs.
WMT Price Action: Walmart is up approximately 15% since Cramer called out company management.
The stock was up 0.52% at $140.11 at press time, according to Benzinga Pro.
Photo: courtesy of Walmart.
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