Women today are now more affluent and influential and for every dollar spent in the U.S., $0.80 comes from a woman.
In many of the places where it counts the most, women are in fact taking control of everything. More than half of the workforce and more than half of management is now women. For every two men earning college degrees this year, there are three women. The global economy is becoming a place where women are more successful than men as manufacturing yields to service, information and innovation. – Hanna Rosin, 2010The Core Female Market Right in Front of Your Eyes
The manly image that many companies have held must be changed in order to increase revenue. There is a potential market for many companies walking through their stores every day.
Take Sprint (S) for example.
Here’s a case study I found on how Sprint has identified this core market and put things into action.
Sprint over the past few years shows how much of a change is required to meet the needs of this new generation of woman consumers. Women make up more than half of Sprint’s store traffic and make or influence 80 percent of purchases. In the past, Sprint corporate retail stores were narrowly focused on product and technology. Customer-facing communications were dominated by device imagery and complicated industry-specific jargon–representing the days when technology was considered male- and gadget-focused.Nordstrom (JWN) is another place where women love to shop. Prices are higher, but the customer experience and emotional service provided makes it the go-to place for women.
Over the last couple of years, however, Sprint has refocused everything from the company’s retail design to their customer interactions to speak more clearly to women consumers.
“Our stores used to be organized around phones for business or for entertainment,” says Mark Rexroat, Director of Retail Communications at Sprint. “We recognized the importance of women in the market, either in professional roles or in a new emerging super-mom role, where they often serve as the family’s communication hub and as CEO of the household. She is juggling so many roles in her life that we have an opportunity to help her be as productive as possible.”
Nordstrom is a great example of a brand that has built its business on service. Although it may not be the least expensive department store out there, the services the store offers have earned the loyalty of women, especially mothers. They have large lounges where new mothers feel comfortable breast-feeding and they’ve implemented an unconditional return policy that makes it easy to shop for family members who are not available to try on clothing in the store. And Nordstrom has unique services, such as a free shoe-tying class for children, that helps build a local community feeling and gives moms the freedom to shop, browse, and relax knowing that their child is having fun and learning a valuable new skill.Find Stocks That Are Tilted Towards Women
Looking for some new ideas or simply want to learn about a new industry?
Then why not look into companies where the women are the major focus.
The immediate thought is beauty and fashion such as cosmetics, handbags and other luxury goods, but there are more categories that you may not have thought of.
I certainly won’t be able to go through everything, but here’s a taste of what you can start thinking about and looking into.
Beauty and Fashion Stock
As the middle class in emerging countries rises, this category will see a lot of action.
L’Oreal (PINK:LRLCY) is a France-based company only listed on the pink sheets in the U.S., with low volume and huge market cap that is not well followed in the U.S.
Just an FYI, there is a 1.33% disconnect between the pink sheets and the stock on the French index.
A luxury goods company that women love is LVMH Moet Hennessy (PINK:LVMUY), best known for its Louis Vuitton brand. Asia and particularly China are a huge market for luxury brands. As I mentioned earlier, the rising middle class in emerging markets is a huge market for luxury goods brands.
Or how about Coach (COH)? Something local and cheaper than LVMH. It also has a solid dividend at 2.18% with a EV/EBITDA of 9 and P/FCF of 20.
Women not only take the bigger share of raising children, but also pets. They are the ones that usually buy toys, clothes and other accessories for their pets.
Petmed Express (PETS) is an online pet pharmacy that has traded in value territory since the end of last year due to increased competition. The 5.81% dividend is an eye catcher and the company has increased its FCF which allows them to increase the dividend without resorting to debt or keeping it stagnant.
Petsmart (PETM) is a pet store chain and has been on fire since 2009. Pet food, supplies and other related products have seen price increases, but for some reason, owners are not very price sensitive when it comes to their pets. From my personal behavior, I’ve noticed that I will cut back on my spending more than for my pets.
My dog groomer charges $70, but my wife refuses to let me shave the dog. The dog wins over me every time.
Considering the impressive performance over the last few years, EV/EBITDA is still only 9.9 with a healthy ROA of 14.4% and ROE of 29%.
Women are the CEOs of the home. They work, juggle family, parenting, house chores and more. The home is also decorated by the woman.
That’s where companies like Home Depot (HD) and Bed Bath and Beyond (BBBY) come in.
More women now visit stores like Home Depot and there is a healthy mix of female employees in my local stores. It is a lot less stressful for my wife to ask other women instead of receiving an answer in technical jargon and feeling dumb.
On a different note, home builders have bounced back this year. The SPDR S&P Homebuilders index (XHB) is up 46% year to date and since I don’t think trying to get into home builders is the best choice at the moment, companies like Home Depot and Bed Bath and Beyond are interesting alternative plays.
Disclosure: No positions
About the author:
My name is Ben C. and I am 2nd year MBA candidate at the Anderson School of Business at the University of California- Los Angeles. I have a BS in Economics from the Wharton School of Business at the University of Pennsylvania. Before coming to Anderson I worked as a generalist equity research analyst for Right Wall Capital, a long-short equity hedge fund located in New York City. Prior to working at Right Wall I worked as an analyst at Blue Ram Capital, another long-short equity hedge fund located in Rye Brook, NY. This past summer, I worked for West Coast Asset Management as a research analyst. West Coast, which was co-founded by Kinko’s founder Paul Orfalea, is run by well-known value investors Lance Helfert and Atticus Lowe.