(Bloomberg Business) — While analysts obsess over how the preferences of the millennials could shape market returns as they enter the workforce, Jefferies sets its sights on how the baby boomers – a generation with one foot out the door of the labor market – will alter their spending once they retire.
The boomers aren’t as large a cohort as the millennials by sheer numbers, analyst Andy Barish notes, but what they lack in size, they more than make up for in wealth:
Jefferies surveyed 410 Americans who plan to retire within six years. The results indicate that boomers will go out to eat less, but spend more time travelling and golfing. A couple caveats: this survey group isn’t necessarily indicative of the typical Boomer – the household income of roughly $100,000 is above the national average, and Jefferies “skewed the survey male (69 percent) so that we could get more robust answers around golf.”
Still, Barish highlighted ClubCorp, Callaway Golf, Royal Caribbean, and Nike– all of which are “buy” rated by analysts at Jefferies – as some of the beneficiaries of boomers’ retirement spending plans.
“According to our survey, over 80 percent of Boomers plan to keep spending the same … [or] even more on golf equipment and accessories after retirement,” writes Barish. “This bodes particularly well for ELY [Callaway Golf Company], the preferred golf equipment and accessories brand among the Boomers surveyed.”
With ~15% of Boomers playing golf, there will be around ~7 million golfers moving toward retirementwhich will more than double the ~3 million golfers currently there. Furthermore, the positive correlation between age and rounds played, which has been a consistent trend over the past 20 years, means that golfers ages 65+ are playing 80%+ more rounds than golfers ages 50-64, playing 52 rounds per year on average. We estimate that Boomers will contribute at least 50M incremental rounds played as they enter retirement, taking into consideration that many Boomers are still feeling skittish about the economy and will be cautious in their spending post-retirement.
But since 74 percent of the boomers surveyed also said they plan to lower their discretionary spending after retiring, they’ll have to trim their expenses elsewhere to afford all this golf and travel. Some 86 percent of respondents said the portion of their budget dedicated to eating out was slated to come under the knife.
“[T]hough full-service casual dining concepts have endured slower growth for years, the survey suggests potential additional sales risk,” concludes Barish. “Casual dining already trades at a large discount to QSR [quick-service restaurants] and fast casual, but the group does trade above historical average and there could be some excessive optimism in some of the Street numbers.”