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Darden Restaurants‘ “stellar quarter” of strong sales growth is one of the signs that the U.S. economy is far from a recession, CNBC’s Jim Cramer said Monday.
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Cramer praised CEO Gene Lee, saying he “has a terrific grasp of what’s going on in the restaurant industry” to bring more guests into its thousands of its eateries across the country. The restaurant operator, which owns casual dining chains such as Olive Garden, Longhorn Steakhouse, and Bahama Breeze, bested Wall Street expectations in its Thursday earnings report and raised its forecast for 2019.
Darden did not attribute the higher sales and outlook to last year’s tax cuts, Cramer pointed out.
“Sometimes the big picture stuff is irrelevant and it all comes down to a better bowl of pasta,” said the “Mad Money” host. He said commentators love discussing macroeconomics and generalizing individual stocks, but “rather than focusing on these aggregate data points, I prefer following the largest companies and just listening to what they have to say.”
Lee told stockholders that same-store sales at Olive Garden, which has 2,100 restaurants in all 50 states, was up 4.3 percent thanks to the franchise’s decision to add 50 percent more meat to its Chicken Alfredo and strong consumer spending. He said the 2018 tax breaks did not play a large factor in sales growth.
“Confidence remains strong, wages are growing across all the different parts of the population … I’m not really worried about year-over-year changes, based on ‘was there a little bit more tax money with the consumer,'” he said on the conference call. “We’re going to continue to be able to grow share in that environment.”
On top of strong sales, Darden mitigated its year-over-year labor costs and turnover, with the backdrop of 4 percent wage inflation, Cramer noted. He emphasized that investors should study companies’ fundamentals to find and buy stocks that are being dragged down by the sell-off tsunami without warrant.
“Every time I see the futures get knocked down by Japanese selling or European weakness or Chinese things, I’ve gotta remind myself that America has a robust economy that’s nowhere near going into a recession,” he said. “Believe me, if we were really in trouble, you would hear about it from the likes of Darden or Chipotle, and not to mention Walmart, Costco and Target. They said nothing about that sort.
“If they say business is good because taxes are lower, O.K. great. If they say it’s something else then it’s something else,” he added.
Despite the positive information, there’s a lot of selling going on the S&P 500, Cramer said. Darden and Chipotle are two stocks worth filling up on, he said.
Dardens’ shares are up about 18 percent in 2019 and 40 percent in the past year.
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