Give Jackie and Jeremy a Raise!

AnnaLisa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

This time of year it warms the cockles of my heart (would some cardiologist please explain what those are, exactly?) to read a story like the one about Krispy Kreme (NYSE: KKD) employee Jackie Braun of Austin, Texas who did her darnedest to make a customer’s request for an Olympic logo made with doughnuts, in fifteen minutes. Customer Jia Jiang was actually hoping to be disappointed as he pursues a quest to deal with his fear of rejection by documenting 100 outlandish requests for his blog.

Jackie did it but wasn’t satisfied with its perfection so she gave it to him gratis. Now, there’s a Facebook and Youtube campaign to “Give Jackie at Krispy Kreme A Raise.” I wrote an earnings preview about Krispy Kreme just two weeks ago and was impressed with the progress they’ve made since their ignominious fall from grace in the mid-2000’s. Then they beat on top and bottom lines and the share price surged 25%. Yes, that’s the sound of me patting myself on the back you hear.

When you read so many reports of disgruntled restaurant workers sabotaging food over the past few years and probably have dealt with some sullen and underpaid employees a story like this makes news and rightly so. Of course, as these stories go, Jackie’s modesty prompted her to claim it was no big deal, “We’re here to make people happy.” But if you watch Jiang’s Youtube videos you’ll realize not only does Jackie know her stuff, but her attitude is just plain heartwarming.. just like a Hallmark commercial. And it makes for amazingly good PR.

Is Customer Service Still Investable?

Absolutely. Yes, a lot is made of Krispy Kreme's commodity costs (which they have been hedging), P/E (currently at 3.96), beta (.76) etc. but what all of it eventually, fundamentally comes down to is customer service. Once you have the product or service down then you have to dazzle your customers. Especially if you are in an industry with no moat like fast food. Doughnuts and coffee make up the one-trick pony that is Krispy Kreme but they do it better than their competitors.

Competitors Dunkin' Brands and Starbucks may have sandwiches and tea and pastries but when I want the best doughnut I go to Krispy Kreme which is still a sensory experience, with sights, i.e. the Doughnut Theatre, aromas, tastes, the stickiness of the glaze and so on.

The best businesses have the best service. There, I said it. Apple, Amazon, IBM, Whole Foods, Disney- there are good reasons these have outperformed the market. Some of these are also good at making a transaction into an experience, a shopping trip into a destination. A moment into a memory. Okay, no more Kodak moments here, they're bankrupt anyway.

Another Hallmark Moment

Just in time for the holidays Jiang also requested of Jeremy at FedEx to send a package to Santa Claus. No address, just Santa. Jeremy, while bemused, tries to be sincerely helpful and accommodating. It's documented on the same blog as Day 9 of Rejection Therapy. FedEx Corporation (NYSE: FDX) is coming up on their busiest time of the year, even more so with the bump up in online shopping this year with their busiest day ever expected this Dec. 10.

FedEx has a small yield of .60% and a P/E of 13.86 with a forward P/E of 11.31. Rival United Parcel Service (NYSE: UPS) is much larger, almost double the market cap at $68.84 billion. UPS has a 3.20% yield but its P/E is higher at 21.38 and they don't have Jeremy of Texas. With the amazing success of (NASDAQ: AMZN) and other online retailers this year either one should perform well, but FedEx has earnings coming up on Dec. 19 and now might be a good time to get in before that catalyst.

Kudos to Costco

I'd be remiss if I didn't mention Costco Wholesale Corporation (NASDAQ: COST). Jiang also asked a Costco manager if he could talk up Costco over the intercom. The manager, Robert, was extraordinarily patient explaining there was no intercom just walkie-talkies and rejected his offer very politely on the basis of company policy with a counteroffer of free pizza and hot dogs. Now, that's how you let someone down gently.

Costco is another retailer that has performed well, attracting both higher end and bargain shoppers, providing vetted products from toilet paper to wine to high-end artworks. It is trading about eight percent off its 52 week and all time high of $104.43 and it's reporting on Dec. 13. The P/E is 24.80 and it has a yield of 1.10%. A recent Motley Fool article by Dan Caplinger pointed out that Costco is one of the three retailers most attractive to the affluent but frugal. (Home Depot and Target also made the list). The Costco chart looks very similar to an Apple chart except for that sell off from $700.

Despite being a big big-box wholesaler the employees at Costco are paid well and enjoy very good benefits. No social responsibility qualms here, not like investing in Wal-Mart. Bill Gates holds a 1.42% stake in the company and Vanguard Group and Capital World Group hold 4.36 and 6.48% stakes, respectively.

What You Can Learn From Rejection

I enjoyed watching Jiang's videos as he tries to negotiate these crazy requests and it's illuminating how they are variously handled by these publicly traded companies. His asides at the end as he learns lessons in the world of business are good lessons for any businessperson. At the end of the day remember this from The Godfather, "Tom, don't let anybody kid you. It's all personal, every bit of business. " Every single customer expects personal service and the best of the best companies know it.

leglamp has no positions in the stocks mentioned above. The Motley Fool owns shares of and Costco Wholesale. Motley Fool newsletter services recommend, Costco Wholesale, FedEx, Krispy Kreme Doughnuts, and United Parcel Service. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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