1 Stock Set to Profit From This Unlikely Growth Industry
For generations, a bar of Irish Spring, a can of cheap, foamy shaving cream, and a bottle of Old Spice comprised a man's Neanderthalish grooming regimen. These days, one only has to peruse the shelves at most any men's retailer to notice the overwhelming options facing (no pun intended) men due to the explosive growth in the male skin-care industry. Which retailers best understand men's needs and are well-positioned to benefit from this trend?
Old Spice, be gone
The NPD Group, a leading market research firm, reported in a recent study that sales in the men's facial skin-care market grew 11% in 2011. The study notes that creating dedicated space for men within retail environments and providing men with simple, clear instructions for product use increase the adoption rate of these products. Not surprisingly, retailers are muscling their way into this market.
Clamoring for gentlemen
Retailers are fervently creating dedicated space for male shoppers. The nation's top department store chain, Macy's (NYS: M) , is carving out square footage at a downtown Philadelphia location and outfitting it in man-cave-like style with flat-screen TVs, free Wi-Fi, and coffee machines. More upscale retailer Nordstrom (NYS: JWN) is following suit. Both could prove viable options.
Ulta Salon (NAS: ULTA) offers an array of men's skin-care products and posts impressive sales growth -- more than 57% per year over the past five years and expected five-year sales growth of 25% annually. But I don't think the store format bodes well. I think men want convenience when shopping; a dedicated trek to a stand-alone, big-box store probably doesn't entice. I think the most successful retail format is the one he's already in -- a mall while buying clothes or a drugstore buying toothpaste.
Drugstore retailer CVS Caremark (NYS: CVS) also notices this trend. It realizes that men already visit their stores to buy things like toothpaste, magazines, and beer. CVS has tested "male-dedicated sections" within their stores. Look for CVS' male skin-care product offerings to expand.
Interesting spin of the barber chair
The Art of Shaving, which was acquired by Procter & Gamble (NYS: PG) in 2009, has embraced an interesting approach. The retailer uses the classic daily male skin-care event of shaving as a springboard for its products and services.
The upscale, man-cave-like retail outlets are conveniently located in dedicated spaces within shopping malls across the country. The dark wood and leather-decorated retailers are staffed with people who can educate in a problem-solving orientation.
If anyone can serve customers the way market research shows they want to be served, it's consumer goods juggernaut P&G. This is a company that knows shaving; it dominates the male razors and blade market with 70% market share. Or if a man prefers a self-care regimen of the old-school variety, the company's got your back with its familiar and still-popular Old Spice product line. Old Spice body wash sales are at an all-time high after an impressive and memorable ad campaign.
Smooth this out for me
I see a couple of ways an investor can play this. An investor can focus on the retailers making this market a priority or the manufacturers that produce the products.
Of the retailers, I like Nordstrom and Procter & Gamble's The Art of Shaving. Nordstrom and P&G expect 11.49% and 8.40% annual sales growth, respectively, in the coming five years. Of course if you're buying Nordstrom it's not just because of its male grooming niche products, but for its larger presence in high-end retail. Procter & Gamble has a bit more skin in the game with its massive Gillette division, and I believe its customer insight and how the company chooses to capitalize on a man's preferred shopping experience is interesting. I'd put my money on P&G.
Nordstrom and Procter & Gamble aren't the only stocks in the retailing space I think are well-positioned for growth right now. The Motley Fool's Top Stock for 2012 is another great retailer promising huge growth for investors. Read about this one exciting retailer in a free report here.
At the time this article was published Fool contributor Nicole Seghetti owns shares of CVS Caremark and Procter & Gamble. She likes the smell of Old Spice. Motley Fool newsletter services have recommended buying shares of Ulta Salon, Cosmetics & Fragrance, and Procter & Gamble. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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