Yahoo Finance RVs and recliners are back thanks to millennials
Americans are feeling flush with cash, as reflected by their spending on big-ticket items.
Recreational vehicles (RVs) and furniture fall into the consumer discretionary category, which basically includes nice-to-have, non-essential goods. The XLY consumer discretionary ETF, which tracks the sector, is up 17% in 2018.
Sales in RVs and recliners, in particular, are seeing major gains. Both industries have been pivoting away from older consumers and successfully targeting young adults who are starting to form families.
Furniture maker La-Z-Boy (LZB) based in Monroe, Mich., beat on both the top and bottom lines for its fiscal first quarter. On Aug. 22, its shares skyrocketed more than 20% on a surprise earnings report, making it the best day for the stock since June 21, 2017.
During the company’s earnings call, CEO Kurt Darrow specifically highlighted its $75 million Joybird acquisition, which closed on July 30. The legacy sofa company is betting on Joybird’s mid-century modern products and e-commerce-first strategy to reach the millennial consumer.
The company faces stiff competition from e-commerce players like upstart Burrow (more than half of its customers are between 25 and 35 years old). But a core feature of La-Z-Boy’s strategy is actually selling more of its products on competitors’ sites like Wayfair (W) and Amazon (AMZN).
For so long, the narrative was that millennial behavior diverges from that of their parents and grandparents. But, their habits are proving to fall right into the same routines as the older generation.
RVs are cool again
Wholesale RV shipments reached its highest annual level on comparable record at 504,600 units, a 17.2% increase over 2016, according to the RV Industry Association. The trade group predicts that shipments will hit 521,700.
In June, Winnebago (WGO) reported an 18% increase in sales for the quarter, boosted by its growth in travel trailers.
After RV shipments dropped to a 30-year low in the downturn of the late 2000s, demand is stronger than ever, according to Pete Reeb, principal at California-based John Burns Real Estate Consulting.
The demand for RVs is expected to continue to increase as real per capita net worth improves and the prices of homes keep appreciating.
In response to this demand, homebuilders like Lennar (LEN) and Toll Brothers (TOL) are even offering individual garages or communal lots at a premium.
The popularity of RVs can partially be explained by the evolving — and shortened — definition of vacation. As Katie Denis of the U.S. Travel Association’s Project: Time Off told NPR, “The partial week [vacation] is gaining in popularity.”
Americans are cobbling together days here and there, making long weekends, rather than taking long stretches of time off for vacation.
“With the rise of house and apartment rental websites like Airbnb and VRBO, suddenly baby boomers have access to way more vacation properties than you’ve ever had in the past. Instead of buying a second home somewhere and being locked in, you have the option of being mobile,” said Reeb.
Melody Hahm is a senior writer at Yahoo Finance, covering entrepreneurship, technology and real estate. Follow her on Twitter @melodyhahm.
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