In a note titled "Spending implications from a new generation of parents." Goldman Sachs takes a deeper look into what companies and sectors could benefit from this massive age group approaching parenthood.
Millennials are maturing into parenthood at a time of improving economic conditions, accelerating household formation and a recovery in the number of births. We believe this shift triggers two important spending catalysts: 1) a cyclical increase in child-related expenditures like onesies, diapers, and infant formula, 2) a secular trend towards brands and business models that align with this generation’s unique set of values (with the potential spillover effect on spending for the entire family).
Goldman analyst Taposh Bari and his team looked at everything from the changes in economic conditions to evolving social values.
We believe many of the factors shaping Millennial Moms’ values today –technology, the economic cycle, and geopolitics – also affected Gen-Xers and Boomers as they entered parenthood. While the times have certainly changed, we believe this generation’s impact on consumption will be most influenced by its unique set of values and greater access to technology (i.e., smartphones, social media usage, digital content).
Here's a look at the annual number of live births over the past half century.
So how do you make an investment play on this new generation of parents? Here are some of the winners, in Goldman's view.
- Target: Goldman expects the retailer, which has identified Millennials as a key demographic, to focus on its baby and health and wellness offerings as it "repositions" its business.
- Hasbro: Goldman likes this company due to factors like its growing licensed partnership with Disney.
- Disney: The firm expects Disney to continue to perform well among families.
- Netflix: Age appropriate content, parental controls and mobility make this name attractive.
- Starbucks: Parents don't appear embarrassed to feed their kids Starbucks, a rarity among large incumbents, Goldman says.
- Whole Foods: Millennials appear to have a large focus on healthy lifestyles, making names like Whole Foods attractive.
- Amazon: Competitive pricing, customer service and relevant merchandise are all reasons Goldman likes this company.
- Zulily: Poised to benefit from the growth in online and mobile retailing.
- Wayfair: Much like Amazon, the online furniture retailer offers competitive pricing, customer service and relevant merchandise.
- GrubHub: Goldman likes the convenience, safety and reliability of the food delivery service.
- Carter's: Strong earnings growth and its presence across channels (mass market, department stores, e-commerce, and more) will lead to continued success.