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Steven Chen
Steven Chen
Articles (206)  | Author's Website |

Urbem's 'Megatrend' Series: Sheconomy

We list a few quality businesses poised to win over women's hearts

Demographic shifts matter in terms of their implication of tailwinds for businesses and investors. One of the most prominent is the aging population, as we have discussed previously. Meanwhile, we think that the expansive "sheconomy" should be as significant but appears to be less talked about.

This megatrend is underpinned by a combination of several demographic subtrends:

  1. A growing female labor participation rate.
  2. An increasing share of single women, whose purchase power generally outperforms the average.
  3. A narrowing wage gap between genders.

An intuitive approach for investors to look for companies providing products already over-indexed on the women's side. Some high-return, quality-growth examples that we have been following include Lululemon (NASDAQ:LULU), Estee Lauder (NYSE:EL) and Pandora (OCSE:PNDORA).

Notably, Danish jeweler Pandora is still in the middle of a turnaround. The momentum slowed down as a result of growing pains, in our view. The new management team has been dealing with the restructuring from all aspects (e.g., product, branding, distribution). Pandora has a unique value proposition of affordable luxury that inspires women to express their individuality. We think that the development is worth watching as growth would highly hopefully be of superior quality once the company returns to its previous status.

We expect prestige beauty leader Estee Lauder and Canada-based athleisure trendsetter Lululemon to continue leveraging their substantial brand equity to win over women's hearts for the foreseeable future. The whitespace for both businesses is vast, especially in the case of Lululemon with only 12% of total sales coming outside of the U.S. or Canada (versus 68% at Estee Lauder). At the same time, Lululemon could see more and more challenges down the road from sportswear giant Nike (NYSE:NKE), which has been aggressively shifting resources towards its women's business. The unshakable fashion industry leader recognizes that the global women's footwear and apparel market is one-and-one-half times larger than the men's, while only generating roughly one-quarter of its sales from women. The company is definitely eager to change that, firing on all cylinders (i.e., research, product development, marketing, etc.) to grow this segment.

Of course, investors should also see opportunities outside of the fashion and beauty domains to enjoy the growing sheconomy. For instance, the discretionary spending power of single females can propel lifestyle-oriented businesses like Starbucks (NASDAQ:SBUX) or even the pet economy - think animal testing provider IDEXX Laboratories (NASDAQ:IDXX) and pet pharmacy Petmed Express (NASDAQ:PETS). In addition, off-price retailers could benefit from the more value-seeking segment of the sheconomy. TJ Maxx (NYSE:TJX) and Ross Stores (NASDAQ:ROST), both well known for a treasure-hunting shopping experience, regard the female group as the majority of their store visitors.

Disclosure: The mention of any security in this article does not constitute an investment recommendation. Investors should always conduct careful analysis themselves or consult with their investment advisors before acting in the stock market. We own shares of Nike.

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About the author:

Steven Chen
Steven CHEN is a quality-focused, business-perspective investor (with bottom-up opportunistic approaches), an ex-hedge fund analyst on Wall Street, a serial entrepreneur, computer scientist, and free-market capitalist.

Steven is the Managing Partner of Urbem Partnership, a value/quality-focused investment partnership fund (www.urbem.capital).

Steven can be reached at [email protected], LinkedIn, or WeChat (ID: LSCHEN2005).

Also, check out his column at Smartkarma on the Asian market - www.smartkarma.com/profiles/steven-chen

Visit Steven Chen's Website


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