• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Consumer Discretionary

Cramer: Value in Stores Can Mean Value in Stocks

Dollar General typifies consumers' quest for a good buy.
By JIM CRAMER
Mar 10, 2016 | 02:31 PM EST
Stocks quotes in this article: DG, MCD, JACK, ROST, TJX

There's an insatiable demand for value in America. If you offer something cheaper than anyone else, you are going to be met with a level of outright eagerness that will shock you.

We've seen it in restaurants where McDonald's (MCD) has taken the country by storm with lower prices and an all-day breakfast that's considered a terrific bargain, one that Jack-in-the-Box (JACK) has complained about vocally as a price disrupter that has hurt its stock. I think the stock of McDonald's, even up here, makes sense to buy, even if it is just a partial amount as you wait for lower prices.

We've seen it in retail where the two companies with standout performance, Ross Stores (ROST) and TJX (TJX), very specifically offer lower-price, brand-name goods that they can buy from department stores frantic to dump inventory. These two companies are direct beneficiaries of the woes we have seen at countless full-price retailers and you are the winner when it comes to buying the same quality merchandise you would see at a department store at a much lower price. The stocks of both Ross and TJX have run after they reported excellent quarters and I hate chasing. I would again, however, initiate positions in either one because of their growth prospects and the lame nature of so many of the larger department stores they buy from.  

Today we are seeing the zest for value in the dollar stores, specifically Dollar General (DG), which put up much better-than-expected same-store sales, revenues and gross margins while at the same time boosting its dividend from 22 cents to 25 cents a share and announcing an aggressive expansion plan while expanding an already generous buyback. It's no wonder the stock's up six bucks or 8% to an all-time high. The company's delivering exactly what the customer wants, brand names for less.

It was about as good a quarter as a company can offer and the commentary was even better, with management talking about how its real estate people are, indeed, able to find enough locations to meet the demand for more dollar stores from the public nationwide. In fact, the biggest concern I heard on this rosy, congratulatory call was Dollar General's ability to put up stores fast enough to meet the needs of the clamoring masses. It intends to open an extraordinary 900 stores on top of the 11,500 it already has. That's quite a difference from the typical national retailer, which has already saturated the U.S. with stores.

How many companies can claim the high-quality problem of putting up enough stores to please customers?

I know it seems strange with the job growth we have and the low interest rates that should be stimulating so much purchasing power, but the average shopper at Dollar General just isn't feeling it. Listen to this little gem spoken by CEO Todd Vasos on the conference call: "The key for our value offering that we have is really what it does, it gives the consumer trial. You have to remember our core consumer can ill afford to make a mistake. So she can't afford to take a flier, if you will, to go out and buy something on a national brand basis that may be a larger size without having tried it." But, Vasos continued, "If we can offer her a national brand offering as an example at a very small size that she can afford, say at $1, it gives her a trial. And once she has the trial, what we've seen is it becomes then -- it migrates into acceptance and she moves from that $1 offering and actually trades up to larger sizes."

There, isn't that the value moment in a nutshell, a consumer who can ill afford a nationally branded item unless she first trials it once? I think that's the reality of both the customer and the country, we just don't hear about it much if we are well off. Given that most Wall Streeters don't have to trial any brand for a buck first before buying, no wonder the company's earnings took the analysts and money managers by surprise. I say, once again, be on the lookout for value in stores. It will almost always translate into value in a stock, one worth sampling for your portfolio if not buying in bulk.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned.

TAGS: Investing | U.S. Equity | Consumer Discretionary

More from Consumer Discretionary

Our Latest Ulta Beauty Technical Strategy

Bruce Kamich
Mar 2, 2021 11:55 AM EST

A bearish divergence could foreshadow price weakness ahead.

The Sagas of a Cruise Operator and a Burger Joint Continue

Jonathan Heller
Feb 24, 2021 10:00 AM EST

Carnival Corp. continues to sell debt and equity as it works to stay afloat, while Steak n Shake deals with problems of its own.

A Furniture Seller and Footwear Retailer With Room to Run

Bret Jensen
Feb 24, 2021 8:46 AM EST

Hooker Furniture and Foot Locker recently raised their dividends and could provide more upside to buyers of the shares in the months ahead.

DoorDash's Charts Tell Me to Stay Near the Exit Door

Bruce Kamich
Feb 22, 2021 8:55 AM EST

Buyers of DASH are not being aggressive.

Ruth's Hospitality Group Serves Up Medium-Rare Charts

Bruce Kamich
Feb 19, 2021 8:28 AM EST

The pace of the advance in the steakhouse operator's shares has been slowing and volume is shrinking, too, so be cautious.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 08:50 AM EST PAUL PRICE

    Michaels: Close to a Deal?

    It appears that a deal could be announced soon. ...
  • 08:34 AM EST GARY BERMAN

    Wednesday Morning Fibocall for 3/3/2021

    SPX (Long-Term View) The 20 DMA @ 3889 with the ...
  • 06:05 PM EST PAUL PRICE

    Michael's (MIK) Up on Takeover Rumors

    The NYT says talks are underway regarding a buyout...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login