Whole Foods Needs to Understand; Trend-Driven Nvidia: Jim Cramer's View

Jim Cramer shares his views every day on RealMoney. Click here for a real-time look at his insights and musings.


Cramer: Whole Foods Needs to Understand Only Comparable Sales Matter

Originally published May 11 at 6:44 a.m. EST

Look, it's a simple stat. It's called comparable store sales growth. When a retailer has it, institutions buy its stock. When it doesn't, they sell it.

Yep, comparing like-for-like, determining how your stores did this year vs. last year. There's really not much more to it.

Positive numbers signal health. Negative numbers equal sickness; prognosis negative.

For years, I have tried not be bound by comparable store sales. Periodically I will say, you know what, that outfit is so good, I will simply overlook that their comparable store sales are faltering. In fact, the experience at that store is so good, I will just waive my rules and focus on other metrics, ones that are more touchy-feely--a really good shopping experience--or are about items on the come, like affinity programs or new ways to pick up or order online or be delivered. I'd get subjective.

Every time I have done that, every time I have left my discipline, I have been wrong. Comparable store sales, like organic growth numbers don't lie. They give you the real health of a company.

And that's why I didn't care about all of the mumbo jumbo on the Action Alerts PLUS charity portfolio holding Whole Foods (WFC) call last night. Yeah, big affinity program; terrific. More cost cuts; fabulous. A big boost in the dividend; amazing and unexpected. All sorts of new board members, including Cramer faves Ken Hicks from Footlocker  (FL) and Ron Shaich from Panera Bread (PNRA) ; fantastic. A new, engaged, chairwoman; dynamite. A new CFO from the exacting Kohl's  (KSS) ; bravo. Still one more buyback; extraordinary. The highest sales per square foot of any retailer; super.

And how were the Whole Foods comps? Minus 2.8%.

Then, never mind. Forget about all of those other goodies. I am not buying your stock. That's the pulse, the only thing that matters. Or, to put it another way, "other than those comp stores, how was the play Mrs. Lincoln?"

Throughout the sickening decline into morbidity of this stock, until hardnosed activist, Jana Partners, got involved to stir things up with the addition of fresh outside board members, there was always something Whole Foods was slinging at you to make you feel that you weren't being coherent in demanding comp store growth. They made you feel petty and foolish for insisting that they beat the comps.

They still ignore the plea for normalcy. Worse, they have new goals: they are pledging to make enough changes to get the company to plus 2% comp store growth by 2020.

All I can say is, if that is their plan, they will lose the company by then. There is no way that this company can continue to be independent if it has such high sales per square foot and such low comparable store sales numbers. It will either be bought by another company -- no doubt the real intention behind what Jana wants -- or it will be taken private, with all of that cash flow and be re-opened with whole swaths of layers of management gone, including the vaunted regional tams teams that had been the hallmark of the growth...until the growth ended.

It's worse than that. At one point, the company is asked why the dividend boost. The response: "We increased the dividend to get, frankly, to 2% yield. We think a 2% yield will attract a certain investor class that maybe hasn't looked at Whole Foods until we get to that yield."

Here's some bad news: there are a couple of ways to get to 2%. One is you boost the dividend. Two is you keep the dividend steady and you keep putting up negative comparable store sales. Believe me, you will get to 2% over time, no problem.

So, despite all of the changes and new blood, I still think that Whole Foods doesn't get it. Growth is the metric. Same store growth. Don't try to think outside that box. The box is normative and rational.

It doesn't work to rationalize about not mattering. It didn't work if you are Abercrombie & Fitch  (ANF) . It didn't work if you are Sears (SHLD) . It didn't work if you are Sports Authority and it didn't work if you are Woolworths or WT Grants or Gantos or Caldor or Jamesway or, well, I can give you dozens.

It won't work here, either, which is why this stock didn't go down last night. Because Jana's not done. It knows that a plan to get to 2% comp growth by 2020 is the new status quo.

There can no longer be status quo for this incredibly profitable, no-growth retailer. The marketplace just won't allow it to stay independent that much longer. The stock goes up because it's too juicy a chance to fix, and they don't have the heart or the guts or the smarts to fix it. So someone else will.

_________________________

Cocktails & Cramer

Join Jim Cramer on May 23 for an exclusive party at Bar San Miguel, his Brooklyn tavern.

You'll get to watch a screening of Mad Money, after which Jim will arrive fresh off of the CNBC set to mingle, pose for photos and answer your investing questions.

Participants will enjoy dinner, drinks, an autographed copy of Jim's book Get Rich Carefully and a free one-year membership to Action Alerts PLUS, Cramer's VIP club for investors. (Current AAP members will receive one extra year of membership for free.)

When: Tuesday, May 23, 6 p.m.-9 p.m. EDT

Where: Bar San Miguel, 307 Smith St., Brooklyn, N.Y.

Cost: $375 per person

Space is very limited, so click here to reserve your ticket to this exclusive event today.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long WFC .

Cramer: Nvidia Is Driven by Every Single Trend That Is Hot

Originally published May 10 at 7:16 a.m. EST
 
How can Nvidia ( NVDA) do it? How can it surprise again? What's driving it?

How about every single trend that's hot, every single trend that could end up being what the future looks like?

Last night, Nvidia and its amazing CEO, Jensen Huang, put on a clinic about the future and where Nvidia plays in it, or I should say dominates in it, along the way putting up 49% year-over-year growth in this not insubstantial company, with $1.94 billion in revenues this quarter alone.

Here's how the company did it:

First, gaming, which was up 49%. It's got amazing chips for the gaming business, ones that turn your PC into a monster-fast machine or can power the new Nintendo Switch, the hottest console in the universe.

It's being driven by what the company called the "headlong growth in e-sports." Get used to the term MOBA--the Multiplayer Online Battle Arena, because it is growing lightning fast. Or, as Huang put it: "With apologies to the start of the baseball season, e-sports is now as popular among the U.S. male millennials as America's favorite pastime."

How popular is it? "More people will be gaming than HBO, Netflix, ESPN and Hulu combined," Huang told us. And this trend could only accelerate with some of the new games coming out of Electronic Arts  (EA) , which, you could tell from its amazing conference call, is clearly benefiting from Nvidia's speed, with Star Wars Battlefield 2 needing this company's chips to accelerate play.

Next is professional visualization, where its chips are in as varied usage as to be used by Lockheed Martin (LMT) for reliable visual reality for the U.S. Navy and by Ikea for demonstration options.

Then there's the data center, where its business is now three times greater than a year ago. Amazon  (AMZN) Web Services, Action Alerts PLUS holdings Facebook (FB) and Google (GOOGL) , as well as IBM (IBM) and Microsoft (MSFT) , all rely on its chips to power their clouds, because of Nvidia's artificial intelligence prowess.

Finally, there is the auto business, which his growing at 24%, and the company's in 225 cars and trucks, winning business this quarter from Bosch, which is the world's largest auto supplier, and Paccar for big trucks.

Huang made it clear that because of the Amazon effect and a shortage of professional drivers, you will need artificial cars and trucks to power everything from shuttles and vans to pizza delivery.

You could see from this call why Intel  (INTC) had to buy Mobileye  (MBLY) . Without it, Nvidia could leave the giant chipmaker behind.

I came away from this conference call, which clearly won the night, recognizing that Nvidia's ahead of everyone else right now in these key areas , because of the intellectual property in its chips and its prowess in artificial intelligence. This is so necessary, the CEO points out, for devices like the Echo with its Alexa network and for souped-up gaming, which is something that 30 million people now engage in.

More important, the fact that all of the cloud providers choose this company is a sign of its indispensability. It's not that it's in the hot areas, that's a mistaken way to look at this company's dominance. It's that its customers need its technology to compete and to stay even with one and another.

You don't use Nvidia, you won't be able to win the enterprise or the consumer. No wonder the stock increased the most in the S&P 500 last year and is jumping so high today. Artificial intelligence is here, and you could argue it's here because of Nvidia's processing power allows it to be. I doubt that any customer would disagree.

________________

Cocktails & Cramer

Join Jim Cramer on May 23 for an exclusive party at Bar San Miguel, his Brooklyn tavern.

You'll get to watch a screening of Mad Money, after which Jim will arrive fresh off of the CNBC set to mingle, pose for photos and answer your investing questions.

Participants will enjoy dinner, drinks, an autographed copy of Jim's book Get Rich Carefully and a free one-year membership to Action Alerts PLUS, Cramer's VIP club for investors. (Current AAP members will receive one extra year of membership for free.)

When: Tuesday, May 23, 6 p.m.-9 p.m. EDT

Where: Bar San Miguel, 307 Smith St., Brooklyn, N.Y.

Cost: $375 per person

Space is very limited, so click here to reserve your ticket to this exclusive event today.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long FB, GOOGL.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long WFC, GOOGL and FB.

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