Cramer Picks Safeway Over Whole Foods

NEW YORK (TheStreet --

Debra Borchardt:

We are going to talk about grocers. Jim normally grows all of his vegetables, but sometimes you've got to go to the grocery store, right? And when we look at grocery stocks, that is a whole lot different than the grocery store we like to visit. One of the names you like here is SafeWay ( SWY)over, say, WholeFoods ( WFM). Now when you look at the chart on WholeFoods, it's a little wonky but SafeWay's been going up.

Jim Cramer:

SafeWay is one of the best performing stocks in the first quarter. A couple of reasons, one is that they announce that they are going to do the spinoff of Blackhawk. Now we always knew that this pre-paid card division was worth a great deal. I've been waiting, waiting, and waiting for this deal. The second is that SafeWay is on to WholeFoods. They understand that organic's the way to go, and these places have reinvented themselves. And finally the third, and I think is the most significant, this company seems to be very shareholder friendly -- far more than I realized. They bought back 20 percent of the float last year. That's incredible. And they've got a nice dividend at 6.7%. Gee, WholeFoods lacks a lot of those positives.

Debra Borchardt:

And here's another thing they're doing if people weren't aware already: SafeWay is hooked up with Chevron ( CVX)where they've got a deal. You shop more. Your loyalty card gets you cheaper gas. Now, my Stop & Shop does that with Shell ( RDS). I can save as much as 30 cents a gallon just by doing my shopping at Stop & Shop. So these loyalty programs are really starting to truly reward these repeat customers, and WholeFoods doesn't do that. WholeFoods says, "I'm going to charge you more. You're going to accept it and that's what you've got to do to get organics." But as you mentioned, all of these stores are already creating an organic section.

Jim Cramer:

Yeah. I just think the novelty of Whole Foods is troubling and it seems to be everyone is nipping at its heels. Costco ( COST)has a big natural section. And I don't want to pay more at the supermarket for what I think some of the stuff is the same. So that's bothersome. I'm not telling people to...I mean I'd query WholeFoods verses SafeWay, that way if the whole group starts coming in, you'll do better but let's not forget the analysts' reports we're reading are now talking about Trader Joe's. I have a Trader Joe's near me and frankly I'd much rather shop at the Trader Joe's because it's gorgeous.

Debra Borchardt:

Good prices...

Jim Cramer:

Yes. Produce is fresh, really just a nice experience. It's in the bank that I got my first mortgage in. So I think that WholeFoods has to be careful. Now they can still triple the store count. It's incredibly well run, but the other guys have figured out the formula, Debra, and that's never good.

Debra Borchardt:

Let me ask you one more name. Kroger ( KR)...

Jim Cramer:

Kroger's just been terrific. It's been our favorite in the group.

Debra Borchardt:

Okay. So there you go. Take a look at Kroger and SafeWay if you're looking for foods because you can't all go to Jim's vegetable farm stand in the summer, so look at those names over WholeFoods.

--Written by Debra Borchardt in New York.

>To contact the writer of this article, click here: Debra Borchardt.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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