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 Lululemon Athletica Inc. (NASDAQ:LULU) 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 store employee in an athletic apparel store restocking merchandise.
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.
Overall LULU ranks 5th on our list of the restaurant and retail stocks Jim Cramer recently talked about. While we acknowledge the potential of LULU 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 LULU 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.