In a negative economic sign, consumer spending fell in April. However, there are still some places where consumers have been happily spending their money. As consumers pull back, look at Apple Inc. (NASDAQ:AAPL), Macy’s, Inc. (NYSE:M), and Whole Foods Market, Inc. (NASDAQ:WFM) for sales growth.
An uneven economy
The U.S. economy has been treading an uneven path since the deep 2007 to 2009 recession. Consumer spending is a big part of the economy. In April it fell into negative territory. And March was revised lower, though it remained positive. There are factors like a strengthening housing market that suggest consumers will be back soon. However, there are other factors, like stagnant wages, that suggest the opposite.
History shows that U.S. consumers will eventually come back to the stores. However, in a choppy sales environment, investors should be looking for companies that offer products and services that consumers are willing to spend on.
High tech toys
While investors have justifiable concerns about Apple Inc. (NASDAQ:AAPL)’s future, customers continue to flock to the company’s stores and products. The tech giant’s list of hit products is impressive, including the iPhone and iPad, and still resonates with customers. The products remain at the vanguard of the tech industry.
It’s true that Apple Inc. (NASDAQ:AAPL) sells into largely mature markets and will be hard pressed to find the next industry-altering gadget. But the tech toys it sells have started to morph into necessities. While much has changed over the past year, including the deep pull back in the shares, the initiation of a dividend, debt sales, and stock buybacks, sales have continued higher.
For example, despite any negatives, year-over-year quarterly sales have been higher in each of the last four quarters. Moreover, annual sales have advanced each year for the past decade, including right through the recession.
Customers clearly like Apple Inc. (NASDAQ:AAPL) products. If retail sales slow down, Apple’s sales may be hit, too. However, based on the company’s sales trends, they aren’t likely to fall off a cliff. With a 2.4% or so dividend yield, growth and income investors should be looking at Apple.
The high end
Macy’s, Inc. (NYSE:M) top line was hard hit by the recession, just like most retailers. However, the company made an important and subtle change to its business. With a focus on higher-end customers, management chose to differentiate the company with customer service. The initiative is called “magic selling.”
Macy’s sales force has been trained to celebrate their customers’ purchases. This is done by engaging with customers and creating a relationship. Basically, the sales staff is making shopping at Macy’s, Inc. (NYSE:M) a more enjoyable experience. Since hitting a low in 2010, sales have been up in each of the last three years. Moreover, the first quarter was the 13th consecutive quarter of 3% or better sales growth.
Macy’s, Inc. (NYSE:M) has two things going for it. First, it caters to higher-end customers, a group that has fared better through the slow recovery. Second, its new focus on customer service has clearly helped to keep it ahead of its retail peers. Even in bad times, people spend money and Macy’s, Inc. (NYSE:M) has differentiated itself as a place where people like to spend.
The shares have moved smartly higher on the department store’s solid results. However, “magic selling” is likely to keep the top line going for at least a couple of more years. Momentum investors should like this retailer.
Groceries
While people can stop buying tech toys and wear their clothes a little longer, they can’t stop buying food. However, margins in the grocery aisle have been squeezed by mass retailers entering the space. Although it’s best to avoid most grocery stores, Whole Foods Market, Inc. (NASDAQ:WFM) stands out for its consistent growth despite the headwinds.
Like Macy’s, Inc. (NYSE:M), Whole Foods caters to wealthier customers and focuses as much time on its product selection as it does on the shopping experience. The company sells in demand healthy and organic products, which is similar to Apple Inc. (NASDAQ:AAPL)’s in-demand tech gear. So, despite intense competition, the company has grown sales every year for a decade.
Part of that has come from new store openings, but that’s only part of the equation. Customers choose to shop at Whole Foods Market, Inc. (NASDAQ:WFM) over its competitors. That’s why sales went up through the recession despite the company’s generally higher cost fare. The shares have headed higher since the recession and are now around all-time highs.
Growth minded investors, however, should still like what they see here. The company only has around 330 stores and looks to have years of expansion ahead. That should keep the top line growing nicely even if a spending pullback drags same stores sales lower for a short period of time.
Go where the buyers go
Even in tough times, consumers keep buying some things. Investors watching consumers with a little trepidation should switch gears and start looking for companies that customers want to buy from. Apple Inc. (NASDAQ:AAPL)’s gadgets, Macy’s, Inc. (NYSE:M)“magic,” and Whole Foods Market, Inc. (NASDAQ:WFM)’ healthy fare are all in demand and should keep these companies ahead of the pack for years to come.
Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends Apple Inc. (NASDAQ:AAPL) and Whole Foods Market, Inc. (NASDAQ:WFM). The Motley Fool owns shares of Apple and Whole Foods Market.
The article Buy Where Consumers are Spending originally appeared on Fool.com.
Reuben is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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