While 2017 is on pace for the highest rate of retail store closures ever as a result of internet business disruption, many investors are missing the fact that not all brick-and-mortar is in trouble. The use of physical locations is evolving as young consumers -- called "millennials" -- value social, cultural, and athletic experiences over accumulating possessions. The youngest adult demographic increasingly accounts for more of total spending and reshapes how real estate is used. Here are three stocks rolling with the changes.
A gym scooping up dirt on the cheap
Athletic wear has become more acceptable as a form of style and fashion -- a trend that has been dubbed the "athleisure movement." That could be indicative of increased consumer awareness of health and wellness, and industries that specialize in such are benefiting. Case in point, Planet Fitness (NYSE:PLNT) is one of the fastest-growing gyms in the U.S., adding 1.2 million net new customers in the first quarter and surpassing the 10-million-member mark.
The company is drawing in exercisers -- over 40% of whom have never been members of a gym before -- with its "judgement-free zone" environment and cheap obligation starting at $10 a month. Franchisees are on track to open over 200 new locations this year, about a 15% increase, supported by the current retail climate. There are plenty of vacancies on the market, and strip-mall owners are more than ready to cut a deal to keep space filled, according to Planet Fitness management.
Adult play-time on the rise
Many U.S. restaurant chains have struggled in the last year as the industry expanded beyond demand, but Dave and Buster's Entertainment (NASDAQ:PLAY) hasn't missed a beat. Same-store sales went up 2.2% last quarter, compared with an industry downward slide of 1.6%. What sets the chain apart is not the gastropub-style food and sports bar but the gaming: The arcade, billiards, and bowling experience for adults is proving to be a big hit.
Dave and Busters expects to open 12 new venues this year, bringing the total count to 107. So far, the company has entered four new markets this year alone and has room to run, as it only operates in 34 states. A large-format store is the norm for high-population areas, but a smaller-format building is allowing the chain to expand to new markets, too.
Digital puts a new spin on lodging accommodations
Young consumers want their experiences to be unique, and the Priceline Group (NASDAQ:BKNG) has capitalized on that. While Priceline itself is not an operator of brick-and-mortar stores, its Booking.com site certainly relies on them and is helping property owners find new business. The website has also been a primary driver of growth over the last few years. Growth in room nights booked has been running well over 20%, and hit 31% year-over-year growth in the fourth quarter last year.
The need for new and unique locations is illustrated not just by Priceline's growth, but also by the new properties hitting its platform. Booking.com's accommodations network now has over 1.2 million properties, a 36% increase from last year, and includes hotels, homes, and apartments.
Betting on a changing economy
The news about retail has been negative, but investors should remember that one industry's pain is another's gain. Commercial real estate is getting repurposed, and select companies are benefiting. If your retail stocks are getting hammered, put these stocks on your list to research.