We recently compiled a list of the Jim Cramer Discussed These 11 Restaurants and Retail Stocks. In this article, we are going to take a look at where Darden Restaurants, Inc. (NYSE:DRI) stands against the other restaurant and retail stocks Jim Cramer recently talked about.
Jim Cramer, the host of Mad Money, recently took a closer look at the state of the consumer, focusing on restaurants and retailers to understand the broader economic picture. According to Cramer, there is a common misconception about the economy, where people tend to think of the consumer as one homogenous group. He pointed out that there isn’t a single consumer whose behavior can explain the overall economic trends. Instead, Cramer identified two distinct types of consumers in today’s market.
“One consumer’s going out looking for absolute bargains. The other consumer’s looking for what I call “premium value” or “value at a price”. More expensive, but relative to similar offerings, you get a great deal.”
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This conclusion came after Cramer listened to a variety of retail and restaurant earnings calls. He expressed skepticism about relying on broad aggregate data, such as national retail sales, which he believes doesn’t capture the full picture. Instead, Cramer prefers analyzing individual companies, piecing together information from different sources to form a clearer sense of the consumer landscape. He believes this approach provides a more accurate snapshot than relying on overarching statistics.
Cramer also noted that the rise of these two different consumer types has perplexed Wall Street. In the past, there was typically one consumer who either spent or didn’t, but that has changed. Now, there are two groups of consumers, each spending in different places.
In his conclusion, Cramer urged investors to stop focusing on whether consumers are struggling financially or facing challenges. The key, he said, is understanding choice.
“The bottom line: Stop trying to figure out if the consumer’s cash strapped. Forget the headwinds. What matters is choice. Right now, consumers are lapping up absolute value at the lowest price or premium value, meaning better stuff that’s a good deal versus the competition. But everything else? Maybe not so much. Hence why the aggregate numbers just don’t tell the story.”
Our Methodology
For this article, we compiled a list of 11 stocks that were discussed by Jim Cramer during the recent episode of Mad Money on December 19. We listed the stocks in ascending order of their hedge fund sentiment as of the third quarter, which was taken from Insider Monkey’s database of 900 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A single diner enjoying an elegant meal in a sophisticated restaurant setting.
Darden Restaurants, Inc. (NYSE:DRI)
Number of Hedge Fund Holders: 28
Talking about Darden Restaurants, Inc. (NYSE:DRI), Cramer said that one of his favorite places is not cheap and attributed the company’s outstanding numbers to the prices charged.
“Take a look at the stock of Darden today, the parent of Olive Garden and Longhorn Steakhouse, it’s up almost 15%. Now, these places are not cheap… One of my favorites is not cheap… Despite the prices, Darden numbers are outstanding and that’s because all of these prices… they actually represent premium value. 14 bucks for an endless pasta bowl is a good deal. 35 smackers for a dynamite porterhouse cut? I know it sounds like a lot, but go compare it to other steakhouses, you’ll find it is a steal.”
Darden (NYSE:DRI) operates full-service dining establishments and has well-known brands such as Olive Garden and LongHorn Steakhouse. During the second quarter of its fiscal 2025 earnings call, management highlighted various menu items, including the Texas T-bone and its signature never-ending pasta bowl, as examples of the value it offers to customers. Management reaffirmed its commitment to keeping pricing below competitors and inflation over time.
Over the past five years, Darden (NYSE:DRI) has priced approximately 500 basis points below the Consumer Price Index (CPI) and nearly 1,000 basis points below limited-service restaurants. The company’s President and CEO emphasized that the company’s pricing has increased by about 20% over the last five years, a figure significantly lower than that of its competitors. Additionally, during its Q2 of fiscal 2025 earnings call, management pointed to Olive Garden as a key example of this pricing strategy, noting that its prices have been 800 basis points below the full-service industry average and 700 basis points below grocery inflation.
Overall DRI ranks 11th on our list of the restaurant and retail stocks Jim Cramer recently talked about. While we acknowledge the potential of DRI as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than DRI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.