July 27, 2021
As we coast past the midway point of the year, most of the trends that drastically altered consumer behavior in a tumultuous 2020 are still going strong. One would be hard-pressed to identify a single event that dramatically altered consumer spending habits faster than the pandemic. Last year saw accelerated digital disruption, explosive growth in home-based entertainment and fitness spending, and a renewed appreciation for outdoor activities.
These trends appear likely to continue throughout the remainder of the year – at least. With that in mind, here are some of the industries that show no signs of cooling off and a few of the public companies that continue to reap the benefits.
Consumers continue to show a renewed appreciation for outdoor activities – particularly those conducive to social distancing. Manufacturers of boating, fishing, hiking, camping and related outdoor gear benefited from robust demand. Outdoor footwear manufacturer Wolverine Worldwide, Inc. (Tii:WWW), outdoor ice chest, drinkware and cooler maker Yeti Holdings Inc (Tii:YETI) and lifestyle apparel, footwear, accessories, and equipment producer Columbia Sportswear Company (Tii:COLM), are just a few of the outdoor gear providers that reported strong sales since the pandemic’s onset. The Callaway Golf Company (Tii:ELY) reported that “unprecedented demand” for its golf equipment drove first-quarter 2021 consolidated net revenue to record heights, reaching $652 million, a 47% increase compared to the same period in 2020. Callaway’s shares are up more than 78% for the trailing 12 months ended July 23, 2021.
Groceries to the Doorstep
While online grocery ordering and delivery is nothing new, the use of these services accelerated dramatically in 2020 when 42% of U.S. consumers shopped online for their grocery items. This acceleration also led to the rise of meal kit services like Blue Apron (Tii:APRN) and Plated, a subsidiary of Albertsons Companies, Inc. (Tii:ACI). Supermarket retailer The Kroger Co. (Tii:KR) invested heavily in its digital platform last year to boost its e-commerce abilities. That investment paid off last year – and continues to do so in 2021. Digital sales grew 16% during the company’s fiscal first quarter ended May 22, 2021. The supermarket retailer’s shares are up about 15% for the trailing 12 months ended July 23, 2021.
Further underscoring the strong demand for these services, online grocery platform Instacart’s valuation nearly doubled to $39 billion after closing a $265 million funding round earlier this year. While speculation abounds regarding when the grocery delivery app will go public – likely sometime this year – the company services an estimated 9.6 million active users, delivering groceries from nearly 55,000 stores across more than 5,500 cities in North America.
Quick-Service Restaurants Holding Strong
While dine-in restaurants were decimated during last year’s lockdowns, grab-and-go quick-service eateries saw double-digit growth in customer traffic. Many restaurant chains, like Pizza Hut, a Yum! Brands, Inc. (Tii:YUM) company, pivoted to offering contactless curbside delivery or partnered with food delivery services like Uber Eats by Uber Technologies, Inc. (Tii:UBER), Grubhub (now a subsidiary of Netherlands-based Just Eat Takeaway.com N.V. (Tii:GRUB)) and DoorDash, Inc. (Tii:DASH) to deliver directly to consumers’ homes. Among the beneficiaries of this trend is industry giant McDonald’s Corporation (Tii:MCD), whose increase in first-quarter 2021 global sales surpassed 2019’s totals, driven partly by a 13.6% rise in U.S. comparable sales.
The video game industry, which had already experienced significant growth over the last decade, grew an estimated 20% due to consumers spending on indoor entertainment options during lockdowns. International Data Corporation (IDC), a global provider of market intelligence for the information technology, telecommunications, and consumer technology markets, estimates global video game revenue at $179.7 billion in 2020. Strong 2020 results for game developers Zynga Inc. (Tii:ZNGA) and Tencent Holdings Limited (Tii:TCEHY) continue through 2021 with sales increases of 69% and 25%, respectively, for their most recent quarters.
Staying Fit at Home
When indoor fitness facilities temporarily closed last year, health enthusiasts took matters into their own hands. Sales for stationary bikes increased 221%, while sales of treadmills grew 127% last year, according to NPD, a provider of consumer data. Home exercise equipment manufacturers Peloton Interactive Inc. (Tii:PTON) and Lululemon Athletica Inc. (Tii:LULU) reported strong demand for their respective products and subscription services. This momentum is continuing throughout the midpoint of 2021. Peloton reported that Connected Fitness Subscriptions grew 135% to over 2.08 million, and paid digital subscriptions grew 404% to approximately 891,000 for its fiscal third quarter ended March 31, 2021. Lululemon announced that revenue increased 88% to $1.2 billion for its most recent first quarter. The athletic apparel and equipment retailer expects strong demand to continue, predicting revenues for its next quarter to increase to $1.3 billion-$1.33 billion.
While it’s impossible to predict precisely how long these trends will continue, signs indicate they will be in play for the foreseeable future.
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