• 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
    • Bruce Kamich
    • Doug Kass
    • 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. / Stocks

Jim Cramer: What Darden Restaurants' Tasty Comp Growth Really Means

The U.S. economy is as good as Olive Garden's Chicken Alfredo.
By JIM CRAMER Mar 25, 2019 | 07:03 AM EDT
Stocks quotes in this article: DRI, CMG, COST, WMT, TGT

We want to generalize because it's easier than doing the homework. We want to use the macro figures because they are spoonfed. We want to impute vast aspects of human behavior to politically charged issues like tax cuts.

But sometimes it all comes down to better pasta.

All last week we heard about sweeping concepts that should impact aggregates, but I find it much more simple -- and more accurate -- to examine the largest of our companies and make sense from what they say. If they say business is good because of lower taxes, then fine. If they say it's bad because of the weather -- and they have a good track record of not playing a blame game -- then I will take it.

So I was genuinely surprised, when reading the conference call of Darden Restaurants' (DRI) stellar quarter, that a Chicken Alfredo dish with 50% more chicken -- not a tax cut -- helped boost same-store sales growth to a 4.3% level. That is not bad for the owner of Olive Garden and an assorted mix of other restaurants.

I like Darden because it blankets the nation with 2,100 restaurants in all 50 states -- and CEO Gene Lee has a great grasp of industry fundamentals. He pointed out the augmented Chicken Alfredo as something that brought people in, not any change in tax policy. "I'm not really worried about year-over-year changes based on whether there is a little bit more tax money... with the consumer where they are feeling strong." In other words, the endless linking of federal policy to the consumer may be more of a thin reed than we think. Lee thinks things could only get better: "Wages are growing across all different part of the population," which he says will only produce better returns for 2019.

Not only that, but the endless worries about labor inflation with wages going up about 4%? Darden, like the 2200-store Chipotle Mexican Grill (CMG) , saw labor as a percentage of costs go DOWN year over year. That's more indicative of the boots on the ground story than anything the labor department tells us.

Digitization and simplified methods of operation drove the reduction. Both chains also cited lower turnover as a reason for lower labor costs. Remember, when you have turnover you have to train new people who are less efficient and more costly. The better run you are, the fewer hiring mistakes you have, the more loyalty you receive, and the higher the profits you generate, something which has always been the key to Costco's (COST) profitability.

All of this matters to me because when I see the futures down off of Japanese selling or declines in Europe, I have to remind myself that we have a robust U.S. economy that is nowhere near recession -- or you would certainly hear it from Darden, or Chipotle for that matter. We would have heard it from Walmart (WMT) , Costco, and Target (TGT) , too. We didn't.

Now all of this positive information will only be put into a rearguard calculus, where all stocks go down off of S&P sell programs, because that's how people invest. Then you can separate the stocks from the bushel and buy the ones that shouldn't be going down but are just caught in the tsunami. Both Darden and Chipotle are two of them. Managements are creating value that is not obliterated by endless political intrigue -- good luck if you thought the Mueller report ended it -- or Brexit, or even the coming onslaught of supply from the humongous slate of IPOs.

Just remember that, and the never ending bowl of pasta, and maybe when the selling clears, your portfolio will be all the more tasty and profitable.

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 | Stocks | Food & Drink |

More from Stocks

Enanta Pharmaceuticals Bounces Off a Key Support Level Once Again

Bruce Kamich
Jul 1, 2022 9:41 AM EDT

The shares of the biotech company appear to be finding a bottom but could use more sideways action to create a better base.

CRISPR Therapeutics Has Turned the Corner

Bruce Kamich
Jul 1, 2022 8:43 AM EDT

Here's our current price target.

A Few Thoughts on How to Approach a Tougher Bear Market Than Most

Bob Byrne
Jul 1, 2022 8:30 AM EDT

A key goal is to keep from losing money while the current bear runs its course, and don't count on positive seasonality leading to the Fourth of July.

Four Things I Know for Sure About the Market

James "Rev Shark" DePorre
Jul 1, 2022 8:06 AM EDT

As the second half of 2022 begins, keep this quarter of observations in mind.

Little-Known Akoya Biosciences Appears to Have Found a Bottom

Bruce Kamich
Jul 1, 2022 7:53 AM EDT

The stock of the life sciences company has found buying interest at a key support level.

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

  • 07:59 PM EDT PAUL PRICE

    Very good quarterly numbers from Bassett Furniture (BSET)

    Bassett Furniture (BSET) blew right through analys...
  • 04:41 PM EDT PAUL PRICE

    First Half Results - Putrid Second Half Results - Likely to Be Much Better

    It's great that we're done with June. 2022 marked...
  • 04:51 PM EDT PAUL PRICE

    We Should Be in for Better Starting Soon

    Window dressing Thursday, the last day of the...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 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