Tag Archives: Baby Boomers

thinking about retail: Dicks Sporting Goods (DKS)

August 16, 2017 By in Millennials vs. Baby Boomers, Millennials vs. Boomers, Retail, Uncategorized Tags: , , , , , 2 Comments

DKS reported disappointing earnings Monday night.  Its stock dropped by 23% in Tuesday trading.  So far this year it has lost 49% of its value, in a market that’s up by 10%.  …this in spite of the bankruptcies of rivals Sports Authority and Gander Mountain, which should arguably have cleared the way for better results.

The obvious culprit here is Amazon (AMZN).

I’m sure that AMZN is a factor.  On the other hand, although AMZN is growing at 4x the +5% rate of annual expansion of sporting goods sales in the US, the online giant represents only about 4% of the total sporting goods market.  DKS alone is 50% bigger–and its bricks-and-mortar competition has shrunk considerably.  So online can’t be the whole story.

I think two other general factors are involved:

–Millennials vs. Boomers, with DKS, to my mind, clearly oriented toward Baby Boomers’ tastes.  This issue here is that although Boomers have more money than Millennials, their star is waning as Millennials’ is rising.

–a “normal” business cycle.  During most time periods and in most parts of the world, in my experience, consumers are constrained in their buying by the limits of their income.  As new households form and families rent/buy a residence, rent/mortgage and, sooner or later, things like furniture become significant purchase categories.  This means less money for other purchases–like new golf clubs.

From the late 1990s through 2007, however, that wasn’t the case. Universal availability of home equity loans enabled consumers to avoid budgeting and prioritizing purchases.  So the typical pattern of contraction in some retail categories while housing-related, expands was absent for an extended period.

Now it’s back.  My sense is Wall Street has yet to catch on.

As an investor, I’m not particularly interested in the sporting goods category.  But I think the pattern I see here isn’t an isolated phenomenon.  If I’m correct, we should be doubly careful of any traditional retailer.

 

 

more on demographics: Millennials vs. Boomers

March 8, 2016 By in Millennials vs. Baby Boomers, Millennials vs. Boomers, Uncategorized Tags: , , 1 Comment

Market intelligence company NPD recently published a paper titled “Winning Millennials, Gen X and Boomers with the Five Ws.”  It analyzes shopping habits of Americans in different age categories based on item-by-item data from individual consumers collected by the NPD Checkout Tracking service.

Its conclusions:

brick and mortar shopping

–as one might guess, the younger the consumer, the greater the preference for online.  The older the consumer, the greater the preference for bricks and mortar.

Baby Boomers are now seniors, meaning they are adjusting down their spending in line with reduced pension–as opposed to salary–income.  Boomers want stability, stores they’re accustomed to, availability of necessities, value for money and one-stop shopping. …in other words, warehouse clubs, where they spend on all sorts of items.  Pretty boring.

Boomers do frequent convenience stores, but mostly for gasoline.  Food accounts for less than a fifth of what they spend there.

–Millennials like convenience stores.  They spend more than other age groups on gift cards there (why, I don’t know).  But they, and Gen X also buy a lot of food in C-stores.

Millennials and Gen Xers ( go to warehouse clubs, but strictly for groceries.

online

Amazon is the king of online for all generations, making up 20% – 25% of individuals’ total online spending.

Millennials spend the largest part of their budgets online, Boomers the least.

Millennials use mobile apps of all sorts–like Uber, Seamless, GrubHub, Airbnb,and Etsy.   (Interestingly, NPD also mentions Target among Millennial favorites.)  Boomers, in contrast, stick with department store websites, QVC and travel services.

The younger the consumer, the more likely the purchase will be something that’s available primarily online or easiest to get online–meaning books, music, software or tickets.

my thoughts

Data from Washington show that Millennials are the largest segment of the US population.  They also show that Millennials’ income is at present about half the size of Boomers–but that Millennials pay is rising as they gain more work experience, while Boomers’ income is being more or less cut in half as they retire.  To my mind, this secular trend argues for investing where Millennials shop.

I hadn’t known how important convenience stores are to Millennials.

I’m more surprised, though, by the characterization of Boomers as a group already deep into a low-income retired lifestyle.  I’d have guessed that was still years off.  More reason to look for where Millennials shop.

 

 

the holiday retail season: Millennials vs. Boomers

November 17, 2015 By in Amazon, Facebook, internet, Millennials vs. Boomers, Retail, stock market Tags: , , , , , , , , , , Leave a comment

Conventional wisdom in the US has long been that 30-somethings want a house, a car and clothing suitable for work.  Fifty-somethings want a vacation home, jewelry and a cruise.

As the Baby Boom generation became more important, therefore, an investor wanting exposure to consumer spending should have shifted away from homebuilders and carmakers and toward high-end specialty retail, luxury goods and hotels and cruise lines.

Of course, there were other secular forces at work, as well–the move from the cities to the suburbs and the dismembering of the traditional department store by specialty retail, just to name two.

Today we’re in the early days of another significant demographic change.  Millennials now outnumber Boomers in the US.  Millennials only earn about half what Boomers do.  And they were hurt much more severely than the older generation by the recession.  But they’re on the up escalator, while Boomers as a group will see their economic power wane as they retire.

Playing the aging of the Boomer generation had two aspects to it, one positive and one negative.  The positive side was hard–finding the small, relatively obscure companies like the Limited or Toys R Us or Home Depot/Lowes or Target or (later on) Coach that would catch the fancy of the Baby Boom.  The negative side was easier–avoiding the losers who didn’t “get” what was going on.  These included American carmakers and the department stores.

In 3Q15 corporate results, we’re already beginning to see the new generational change begin to play out.  Home improvement stores are doing surprisingly well.  Large retail chains are reporting relatively weak results.  What strikes me about the latter is that the worst-affected seem to be the most heavily style-dependent and the firms that have put the least effort into their online presence.  In contrast, I’m struck by how many small online, even crowdsourcing, alternatives to bricks and mortar there now are to buy apparel.

How to play this emerging trend?

The negative side is easy– avoid the potential losers, that is, firms whose main appeal is to Boomers and companies with a weak online presence.

The positive side is, as usual, harder.  Arguably, many of the winners–Uber, and the sharing economy in general being an example–aren’t yet publicly traded.  Absent a pure play, my best idea is to invest in the winners’ onlineness.  The easiest, and safest, way to do so is through an internet or e-commerce ETF.

 

One other point:  for many years, economists have tracked the activity of Boomers as a way to estimate the health of the economy.  To the degree that they, too, fail to adjust quickly enough, their assessments, like department store sales, may understate growth momentum.