With the pandemic well and truly in the rearview mirror, for most Americans, the onset of summer can only mean one thing: increased consumption. However, e-commerce, albeit with a few hiccups in the supply chain, was able to satiate the appetite for goods through the pandemic.
Hence, Americans are now going above and beyond to compensate for the years spent indoors trying to substitute real experiences with virtual ones. Think camping, cookouts, pool parties, and weekend trips.
Consumers are ever keener to redeem their airline miles on other travel rewards on their credit cards for new experiences through revenge travel.
Consequently, airlines, such as American Airlines Group Inc. (AAL) , have turned to bigger airplanes, even on shorter routes, to help ease airport congestion and find their way around pilot shortages, while Ed Bastion, CEO of Delta Air Lines, Inc. (DAL) revealed, “We’ve had the 20 largest cash sales days in our history all occur this year.”
Moreover, as the consumer price index only grew by 4% year-over-year, which is the slowest in 2 years, a pause in interest-rate hikes by the Federal Reserve could add further momentum to the jump of 0.8% in spending in April.
The increased demand for, and consequently expenditure on, services and experiences are also evident in the recent employment data, with leisure and hospitality adding 208,000 positions out of the expectation-beating private sector employment increase of 278,000 for the month of May. The sector was also a notable contributor to the increase of 339,000 in non-farm payrolls for the month.
Given the above, leisure stocks could be smart investments to capitalize on the increased levels of outdoor activity. Here are a few stocks in the realm of traveling or recreational activities that stand to gain during the summer.
While the global entertainment giant has recently been in the news for its ongoing feud with Gov. Ron DeSantis, outside the political and legal arena, DIS is going through a significant transition under the leadership of its returned CEO, Robert A. Iger.
In addition to the Disney Entertainment and the ESPN divisions, the rest of DIS’ businesses will be organized under the existing parks, experiences, and products division.
As a result, DIS reported significant growth at its theme parks during the fiscal second quarter, which saw a 17% increase in revenue to $7.7 billion, with around $5.5 billion contributed by theme-park locations. Moreover, its cruise business also saw an increase in passenger cruise days as guests spent more time and money visiting its parks, hotels, and cruises domestically and internationally during the quarter.
Under various brand names, such as JW Marriott, The Ritz-Carlton, and St. Regis, MAR operates, franchises, and licenses hotel, residential, timeshare, and other lodging properties through two geographical segments: U.S. & Canada and International.
Over the past three years, MAR’s revenue has grown at a 10.6% CAGR. During the same time horizon, the company’s EBITDA and net income have grown at 22.2% and 43.4% CAGRs, respectively.
On June 5, MAR announced its plans to further expand in the affordable midscale lodging segment, following its recent entry into the segment with City Express by Marriott in Latin America.
While the soon-to-be-launched brand has not yet been named, it is currently being referred to as Project MidX Studios. The affordable midscale extended stay brand is intended to deliver reasonably priced modern comfort for guests seeking longer stay accommodations in the U.S. & Canada.
POOL is a wholesale distributor of swimming pool supplies, equipment, and related leisure products. The company also distributes irrigation and landscape products in the United States.
Over the past three years, POOL’s revenue has grown at a 22.1% CAGR. During the same time horizon, the company’s EBITDA and net income have grown at 37.5% and 37.2% CAGRs, respectively.
On May 4, POOL announced an increase in its share repurchase program to a total authorization of $600 million, along with a 10% increase in the quarterly cash dividend to $1.10 per share.
Acushnet Holdings Corp. (GOLF)
The Fairhaven, Massachusetts-headquartered company designs, develops, manufactures, and distributes golf products. It operates through four segments: Titleist golf balls; Titleist golf clubs; Titleist golf gear; and FootJoy golf wear.
Over the past three years, GOLF’s revenue increased at a 12.4% CAGR, while its EBITDA grew at 18% CAGR. During the same time horizon, the company’s net income has also grown at a 30.6% CAGR.
On February 7, GOLF announced the acquisition of the Club Glove brand, including trademarks, domains, and products, from West Coast Trends, Inc. Founded in 1990, Club Glove is the preferred choice by the overwhelming majority of PGA Tour, LPGA Tour, and PGA Club Professionals, and its patented travel gear has long been recognized among the industry’s most innovative and reliable products.
During the fiscal first quarter that ended March 31, 2023, GOLF’s net sales increased by 13.2% year-over-year to $686.3 million. During the same period, the company’s adjusted EBITDA increased by 22.3% year-over-year to $146.8 million, while the net income attributable to it grew by 15.2% year-over-year to come in at $93.3 million.
For Americans who find the great outdoors and road trips more akin to their idea of freedom and the spirit of adventure, JOUT manufactures and markets branded seasonal outdoor recreation products used primarily for fishing, diving, paddling, and camping. The company’s segments include Fishing; Camping; Watercraft Recreation; and Diving.
Over the past three years, JOUT’s revenue increased by 11% CAGR, while its total assets have increased by 11.6% CAGR during the same time horizon.
Due to an improved supply chain situation and increased travel, during the second quarter of the fiscal that ended March 31, JOUT’s net sales increased by 7% year-over-year to $202.1 million. During the same period, the company’s net income came in at $14.9 million, compared to $9.9 million during the previous-year quarter.
