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.”
READ ALSO Jim Cramer Recently Discussed These 7 Stocks and 6 Stocks Jim Cramer Talked About This Week
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.
9. Ollie’s Bargain Outlet Holdings, Inc. (NASDAQ:OLLI)
Number of Hedge Fund Holders: 32
Recounting stocks that bargain hunters love, Cramer mentioned Ollie’s Bargain Outlet Holdings, Inc. (NASDAQ:OLLI) and said:
“They found Ollie’s Bargain Outlet and… they’ve got so many people volunteering for that army. Any officer or grunt can get outstanding, outstanding prices from closeouts.”
Ollie’s Bargain Outlet (NASDAQ:OLLI) is a retailer specializing in a wide variety of brand-name products. During its third-quarter earnings call, management highlighted that current market trends, such as consumers’ increased demand for value and suppliers’ need for larger partners, have been beneficial for the company. The company’s core approach is to provide quality name-brand items at prices typically 20% to 70% lower than those found in more upscale retailers.
John Swygert, Chief Executive Officer said, “Anyone can sell cheap products but we’re all about real brands, real bargains. This has been our value proposition from day 1 and continues to be our competitive moat.” Management also emphasized the company’s long-standing expertise in the closeout business, with over 42 years of experience in offering customers excellent value.
Ollie’s Bargain Outlet (NASDAQ:OLLI) thrives in times of disruption, and management noted that possible tariffs can present an opportunity for further closeout deals. With some traditional retailers potentially priced out of certain goods due to increased tariffs, Ollie’s is well-positioned to acquire these products at bargain prices, allowing it to maintain its competitive edge as a price follower in the retail industry.
8. Williams-Sonoma, Inc. (NYSE:WSM)
Number of Hedge Fund Holders: 35
Cramer discussed that Williams-Sonoma, Inc. (NYSE:WSM) is one of the companies offering value at a price and has great numbers as well.
“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.”
Williams-Sonoma (NYSE:WSM) is a specialty retailer that operates both online and in physical stores, offering a diverse range of home products such as cookware, furniture, bedding, lighting, and home decor. CEO Laura Alber recently spoke about the company’s pricing strategy in the current consumer environment during an appearance on Mad Money. She emphasized the importance of being transparent about costs and criticized the short-term promotional and discount strategies employed by some competitors.
According to Alber, such approaches often train customers to wait for promotions, which ultimately undermines long-term success. Instead, she highlighted the value of maintaining “pricing integrity” by setting prices that customers can trust from the outset. During the third-quarter earnings call, CFO Jeff Howie shared that Williams-Sonoma (NYSE:WSM) has been actively reducing its reliance on China-sourced products, decreasing the share from 50% to 25% over the past few years.
He noted that as tariffs evolve, the company is well-positioned to adapt, thanks to its scale and strategic flexibility. Management also pointed out that by designing and sourcing its products directly, the company is able to secure better pricing, which contributes to its ability to navigate shifting market conditions and maintain its competitive edge.
7. Brinker International, Inc. (NYSE:EAT)
Number of Hedge Fund Holders: 41
Cramer highlighted Brinker International, Inc.’s (NYSE:EAT) Chilli’s low-priced meals and said:
“At the same time, there’s the other consumer who only seeks absolute bargains, the under $11 meal at Chili’s owned by Brinker…”
Brinker (NYSE:EAT) owns, operates, and franchises casual dining restaurants, with two main brands: Chili’s Grill & Bar and Maggiano’s Little Italy. In the first quarter of fiscal 2025, it reported a 13.0% increase in comparable restaurant sales, driven by a 14.1% rise at Chili’s and a 4.2% increase at Maggiano’s.
The growth at Chili’s was mainly attributed to menu price adjustments and a boost in customer traffic. Popular menu items, including the “Big Smasher” burger and Triple Dipper, have resonated well with guests, while the “3 for Me” combo meals have been particularly effective in attracting customers.
Brinker (NYSE:EAT) management highlighted that the “3 for Me” deal, in particular, has been a key driver of traffic, appealing to a broad range of demographics by offering significant value. The data also showed that this offering has brought in more new guests, with those who purchase “3 for Me” returning to Chili’s more frequently than those who did not opt for the deal. Management emphasized that the appeal of high-quality, affordable meals, coupled with a great dining experience, is driving repeat visits across all income levels.
6. Texas Roadhouse, Inc. (NASDAQ:TXRH)
Number of Hedge Fund Holders: 45
Cramer praised Texas Roadhouse, Inc.’s (NASDAQ:TXRH) low prices and overwhelmingly good food.
“At the same time, there’s the other consumer who only seeks absolute bargains. The under $11 meal at Chili’s owned by Brinker and at Texas Roadhouse, the same deal. Incredibly attractive… Texas Roadhouse overwhelms you with fabulous food at a price that seems like they forgot to put one of us on the bill.”
Texas Roadhouse (NASDAQ:TXRH) is a well-known casual dining restaurant chain with locations across the U.S. and internationally. In the third quarter, the company raised menu prices by less than 1% for the fourth quarter, confident that the increase would maintain traffic and support its value proposition. It also anticipates a steady to positive outlook for commodity and labor inflation.
The company confirmed that its 3.1% pricing run-rate in the menu would remain through the first quarter of 2025. Michael Bailen, Head of Investor Relations, stated, “… and then we would have 2.2% rolling-off and we will go through our normal conversations to see what we may or may not do come the beginning of the second quarter.”
For 2025, Texas Roadhouse (NASDAQ:TXRH) management plans to open around 30 company-owned restaurants across all brands. Additionally, a tentative agreement is in place to acquire 13 Texas Roadhouse locations from a major domestic franchisee. International Texas Roadhouse franchisees expect seven openings, while domestic Jaggers franchisees are targeting three new locations.
5. Lululemon Athletica Inc. (NASDAQ:LULU)
Number of Hedge Fund Holders: 45
Commenting on Lululemon Athletica Inc. (NASDAQ:LULU), Cramer said:
“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.”
Lululemon (NASDAQ:LULU) designs, manufactures, and sells athletic apparel, footwear, and accessories. Known for its emphasis on high-quality fabrics and innovative designs, the company has positioned itself as a leader in the athleisure market. This positioning helps differentiate it from mass-market competitors, establishing it as a premium brand in the industry.
In early December, the company reported a 9% increase in sales, reaching $2.4 billion for the third-quarter period that ended in late October. CEO Calvin McDonald expressed satisfaction with the company’s performance, particularly as it entered the holiday season. This growth contributed to a significant rise in net income, which exceeded $1 billion for the first three quarters of 2024, compared to $881 million during the same period in the prior year.
It has also raised its full-year outlook, reinforcing its confidence in the continued success of its business. Lululemon (NASDAQ:LULU) remains committed to its “Power of Three x2” strategy, aiming for $12.5 billion in revenue by 2026. Management has stated that it is ahead of schedule in reaching this target. Additionally, using its 2024 revenue guidance, the company reported a compound annual growth rate (CAGR) of 19% for revenue from 2021 to 2024, surpassing its initial target of 15% CAGR.
4. The TJX Companies, Inc. (NYSE:TJX)
Number of Hedge Fund Holders: 63
Cramer noted that bargain lovers flock to The TJX Companies, Inc. (NYSE:TJX) and has previously called the stock an “investing club favorite”.
“This bargain-seeking crowd loves to shop at TJX. Oh yeah, TJ Maxx, right next to us, which is offering bargains unlimited.”
TJX Companies (NYSE:TJX) is a well-established off-price retailer, recognized for providing a wide variety of products, including family apparel, home goods, jewelry, and other merchandise. During the company’s third-quarter earnings call, management expressed confidence in its position to continue benefiting from the global growth of the off-price retail sector. The company sees significant potential to further strengthen its leadership within this space.
In November, the company announced its plans to expand its T.K. Maxx brand into Spain, a move the company believes will capitalize on the appeal of its off-price model. Management noted that the company’s approach, offering fashion and popular brands at affordable prices, has the potential to succeed in any market where consumers are looking for such offerings. The first T.K. Maxx stores are expected to open in Spain in early 2026, with the company seeing the possibility of opening over 100 stores in the country over the long term.
Furthermore, TJX Companies (NYSE:TJX) raised its earnings per share forecast for the year. It now expects annual earnings per share to fall between $4.15 and $4.17, an increase from its previous forecast range of $4.09 to $4.13. Despite these upward revisions, the company has kept its target for comparable store sales growth at 3% annually, maintaining a steady growth expectation for its business.
3. Chipotle Mexican Grill, Inc. (NYSE:CMG)
Number of Hedge Fund Holders: 69
Cramer noted that Chipotle Mexican Grill, Inc. (NYSE:CMG) is popular because people know they can split a single meal into two, making it a cost-effective option.
“Now there are some straddlers that seem to please everybody like Costco and Chipotle, maybe that’s why their stocks have such high price-to-earnings multiples… Chipotle straddles because everyone knows you can take a Chipotle meal and split it into two. One for lunch, one for dinner.”
Chipotle (NYSE:CMG) operates a popular chain of restaurants that specialize in serving a variety of Mexican-inspired dishes. In response to inflationary pressures, it raised its menu prices for the first time in over a year. The increase, which amounted to approximately 2%, was acknowledged by the company in early December. According to Chipotle’s chief corporate affairs officer, the adjustment was made to help offset rising food costs.
The price increase was noted in an analyst report by Truist Securities, which found that 20% of the company’s surveyed locations had implemented the price hike. In addition to inflation, the company faced higher ingredient costs while addressing concerns raised by customers about shrinking portion sizes. Chipotle’s handling of portion sizes became a contentious issue after viral complaints surfaced on social media platforms like TikTok.
The company was subsequently sued in November 2024 by its shareholders, who claimed that Chipotle (NYSE:CMG) had concealed how many of its restaurants were serving smaller portions. This issue was seen as forcing the chain to spend more on ingredients and negatively impacting its stock price. It should be noted that CEO Scott Boatwright and his predecessor Brian Niccol emphasized the importance of maintaining what they referred to as “generous portions” across all Chipotle locations.
Despite the controversy, the company continues to grow as it reached a significant milestone by opening its 1,000th Chipotlane in November, a digital order pick-up lane designed to streamline the customer experience.
2. Costco Wholesale Corporation (NASDAQ:COST)
Number of Hedge Fund Holders: 75
Discussing Costco Wholesale Corporation (NASDAQ:COST), Cramer remarked:
“Now there are some straddlers that seem to please everybody like Costco and Chipotle, maybe that’s why their stocks have such high price-to-earnings multiples… Costco appeals to anyone who has enough space at home to take advantage of its bulk merchandise.”
Costco (NASDAQ:COST) operates a membership-based warehouse model that offers a wide array of branded and private-label products, with a focus on bulk sales, which provides customers with significant value. The company’s business model has made it a popular choice for shoppers looking to purchase items in larger quantities at lower prices.
During the first quarter of its fiscal 2025 earnings call, Chief Financial Officer Gary Millerchip shared insights into current consumer behavior. He noted that while customers have become more selective with their purchases, they are still willing to spend, particularly as inflation subsides. Shoppers are showing a preference for products that offer a combination of novelty, quality, and value.
Millerchip also pointed out a shift in spending habits, with some customers continuing to purchase higher-end products, like premium cuts of meat, while others are opting for more affordable options across categories such as poultry, beef, and pork. Moreover, Costco’s (NASDAQ:COST) membership base has seen significant growth. The company ended the quarter with 77.4 million paid household members, reflecting an 8% year-over-year increase. Additionally, the retailer reported a total of 138.8 million cardholders.
1. Walmart Inc. (NYSE:WMT)
Number of Hedge Fund Holders: 88
Cramer noted that bargain hunters enjoy Walmart Inc. (NYSE:WMT) and mentioned the company’s low prices.
“This cohort also enjoys going to Walmart. Can’t believe how low the prices have become. They’ve taken down a lot of prices, cheaper than the dollar stores in many cases now that those places have broken the buck. Amazing designer clothes, can’t-be-beat prices.”
Walmart (NYSE:WMT) is one of the most recognizable names in retail and it offers an extensive range of products that cater to a variety of consumer needs. According to CEO Doug McMillon, while general merchandise costs are now lower than a year ago, they still remain higher than they were two years ago for similar items. To address these concerns, the company has focused its pricing strategies on maintaining affordability for shoppers.
Management highlighted that the company’s “Everyday Low Prices” approach was well-received by customers in its third quarter, offering some relief amid ongoing economic challenges. John David Rainey, Executive Vice President and Chief Financial Officer, emphasized the importance of continuing to offer lower prices across both national and private brands, particularly in the U.S.
In line with this strategy, Walmart (NYSE:WMT) implemented price rollbacks on about 6,000 items, including around 3,000 grocery items. Additionally, nearly 2,000 of the price rollbacks from the previous year have been converted into permanent, long-term price reductions. Despite these efforts, Walmart’s CFO acknowledged in a CNBC interview that there may still be instances where prices will increase for consumers. However, he emphasized that the company would continue to work closely with suppliers to help reduce prices wherever possible.
While we acknowledge the potential of Walmart Inc. (NYSE:WMT) 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 WMT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure. None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and investors. Please subscribe to our daily free newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
