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.”
Jim Cramer Discussed These 11 Restaurants and Retail Stocks
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).
Jim Cramer Discussed These 11 Restaurants and Retail Stocks
11. 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.
10. Ralph Lauren Corporation (NYSE:RL)
Number of Hedge Fund Holders: 30
Cramer counted Ralph Lauren Corporation (NYSE:RL) among the companies that provide quality products and called it a premium value business.
“Darden joins three other premium value businesses, Williams-Sonoma, Ralph Lauren, and Lululemon. All had great numbers, also goods that cost a lot of money yet in each case, consumers recognize that their product is worth every penny. That’s why I call it premium value or value at a price. If you’re willing to pay up for quality, but you’re still somewhat cost-conscious, they got you covered.”
Ralph Lauren (NYSE:RL) is a well-known designer, marketer, and distributor of lifestyle products, including apparel, home goods, and accessories. In the second quarter of fiscal 2025, the company reported notable growth in its Retail Average Unit Retail (AUR), which rose by 10%. This was in addition to a 9% increase from the previous year. Management noted that this performance exceeded expectations and was driven by its higher brand positioning and reduced discounting strategies.
During the quarter, the company successfully attracted 1.5 million new customers to its direct-to-consumer (DTC) businesses, representing a high single-digit increase from the previous year. This customer acquisition was predominantly driven by younger, higher-value segments, who were more willing to pay a premium for the brand, reinforcing the company’s shift toward less price-sensitive shoppers.
Ralph Lauren (NYSE:RL) also saw its total retail comparable sales increase by 10%, supported by its expanded penetration of full-price selling across all regions. Additionally, its strong financial performance was highlighted by a 170 basis point increase in its adjusted gross margin, which reached 67.1%. This growth was primarily attributed to favorable shifts toward full-price and international sales, as well as improvements in AUR and lower cotton costs.
