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The main reason I pulled a 180 and got positive on CRI on 6/12 was my view that a long-needed CEO change can get the senior team refocused on actually investing in its brands instead of robbing them of capital and realigning its org chart to facilitate growth – even if it is at the expense of near-term margin. I was pretty confident, in that regard, that new CEO Mike Casey would take advantage of his first quarter out of the box to take down margins by 2-3 points (a level where I think CRI needs to revert to in order to sufficient brand investment capital in place). The 2Q earnings beat certainly proves me wrong there, as Casey printed a decent quarter (and a solid one relative to expectations), when he could have easily tanked the quarter and/or outlook with little recourse.

Does this new team ‘get it’ that it has to play catch-up in investing in its brands to stimulate growth at a consistent rate? This raises an interesting decision tree for me.

If the answer is ‘Yes’ then the timing is still too early on CRI, as there is another guide down to come. Perhaps the sheer magnitude of the changes to come take longer than the 6 weeks since the change was announced. I’m in this camp, and can completely see why it should take time to build the plan – especially given that this plan is likely to not include several senior managers at the company (i.e. Casey needs to walk on eggshells while he cans some colleagues).

If the answer is ‘No’ then this story is back to one where it will rally repeatedly on false starts – only to fundamentally stall due to lack of horsepower to compete. I don’t think this is the case, but tonally – it is THE KEY thing to watch out for. If Casey’s agenda (regardless of how it is discussed on the call) is about ‘tweaks’ to the model instead of material changes in strategic direction, then I’m going to eat crow on this story and head for the hills.