by Hilary Kramer | December 18, 2012 9:00 am
With job creation still sluggish and underemployment also a problem, consumers remain somewhat cautious with their hard-earned dollars. Holiday spending is supposed to be up this year, so it’s not that people are stuffing their money under a mattress and refusing to buy anything. They’re just more selective, which is completely understandable.
So what are consumers’ spending money on these days? In a word, they’re spending money on “experiences.” It is all about the simple pleasures that give consumers a creative alternative to get a dose of “luxury” without overspending. These experiences help consumers escape the pressures of the struggling economy.
Most folks may not be comfortable parting with several thousand dollars for a dream vacation, but they’ll treat themselves to what they can afford. Take a look at beer: Larry Munshower, of North Based Breweries, has noticed that “people have scaled back on expensive houses, cars, jewelry, etc., but just about everyone can afford a $10 six-pack.” Companies that can provide this positive experience for consumers without forcing them to go over budget are in a good spot right now. Three companies worth a look are Apple, Nordstrom, and the Carnival Corporation.
I’ve been cautious on Apple (NASDAQ:AAPL) for a while, but now that is has pulled back from $700 to under $550, it’s gotten interesting again. Growth and margins may not reach previous levels, but the sell-off has been an overreaction. Now is the time when people are going to treat themselves to something like the iPad. It’s the top-of-the-line king of the tablets, and it’s not outrageously expensive. Looking ahead, this company still has billions of dollars that will be used to create new products and gadgets that will “wow” consumers. I’ve had the opportunity to use the Apple TV, and I must say my Apple TV is transformational and has changed the way I watch television. Earnings growth is 24%, and you get a 2% dividend yield to boot.
This is a retailer that a lot of shoppers are turning to, especially with the holidays right around the corner. Nordstrom (NYSE:JWN) gives consumers a real high-end experience. Yes, it’s pricier than many stores like Kohl’s (NYSE:KSS) and Target (NYSE:TGT), but the pleasure provided by the experience makes it worth it to pay a little bit extra. Their clothes are well-made, and consumers have the option to use personal shoppers to enhance their shopping experience. Earnings in the most recent quarter grew 20% over last year, and revenue increased 2.3%, higher than the industry average. The stock also pays a nice 2% dividend yield. I have no doubt that people will continue to buy at Nordstrom’s.
Carnival (NYSE:CCL) is interesting. It’s still a vacation, but consumers can often find attractive deals for a trip to a nice destination with fine dining and live entertainment to boot. Carnival also owns Holland America, Princess Cruises and Seabourn in North America, as well as different lines in the U.K., Germany, Southern Europe, and Australia. So not only do you get a vacation, but you can go on a “themed” cruise. This is great option for families with younger children. CCL earned $1.53 in the third quarter, which was $0.10 better than analysts expected. It yields a strong 2.6%. Times are stressful, and Carnival offers some much-needed stress relief.
With job creation still tepid and the economy continuing its slow recovery, consumer spending still has a way to go to reach the 2008 levels, but the good news is that consumers haven’t stopped spending completely. Yes, big purchases are still difficult for a lot of people, but they still want the opportunity to enjoy the little pleasures in life. As people turn to alternatives to get their enjoyable experiences, companies like Apple, Nordstrom, and Carnival Corporation are worth another look because they are brand names that offer high-end consumers pleasurable experiences without breaking the bank.
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