Summer 2016 to Heat these Industries’ Bottom Lines

shutterstock_277516427Summer 2016 is expected to serve up unusually high temperatures, and nine industries are slated to rack up revenue as flocks of consumers purchase sunscreen, smoothies and movie tickets by the pound to stave off the heat. See which top industries will keep people clothed, cool and UV-ray free this summer.

Juice and Smoothie Bars

2016 Growth Rate: 2.2%

The Juice and Smoothie Bars industry, which is expected to generate an estimated $2.3 billion in 2016, comprises establishments that primarily sell smoothies and fresh-made juices. Seasonality plays an important role in determining demand, as the often semifrozen nature of smoothies tends to appeal to consumers more during warmer months. Industry leader Jamba Juice reports that a significant portion of its revenue is earned during the second and third quarters of the fiscal year, which include the summer months. Furthermore, the National Weather Service is predicting above-average temperatures throughout much of the United States this summer. In particular, the Southeast region of the United States, which comprises an estimated 44.4% of industry establishments, is expected to experience higher-than-average temperatures this season, potentially benefiting industry demand.

Furthermore, juice and smoothie bars are highly sensitive to trends in health-conscious dieting and per capita disposable income. Health consciousness has been rising in the United States due to worsening obesity rates and the widely reported link between fatty foods and increased risks of certain diseases. The healthy eating index, which measures the degree that the average American adheres to the consumption guidelines set out by the US Department of Agriculture, has been increasing over the past five years and is anticipated to continue climbing. The rising healthy eating index is projected to increase demand for newer menu offerings, such as smoothie bowls and meal-replacement smoothies, which are expected to pique the interest of health-conscious consumers. Per capita disposable income also plays a large role in consumer demand, as healthy income growth determines many consumers’ ability to spend on discretionary purchases such as made-to-order smoothies and juices. IBISWorld projects industry revenue to rise at an annualized rate of 2.2% over the five years to 2016. Thanks to these trends, juice and smoothie bars are expected to breeze past the competition over the summer months.

Campgrounds and RV Parks

2016 Growth Rate: 5.3%

The Campgrounds and RV Parks industry consists of recreational vehicle (RV) parks and campgrounds, trailer and caravan parks and wilderness camps. Industry establishments cater to outdoor enthusiasts whose spending on park activities is susceptible to changes in weather conditions, travel preferences and school vacation dates. This is especially true in northern states, where cold weather can lead to large slumps in industry revenue. According to Equity LifeStyle Properties, which holds a 3.0% market share position, many of their RV resorts are mainly used by vacationers and campers; these sites tend to experience performance increases during the spring and summer months and, conversely, a decline in the fall and winter months. Over the five years to 2016, industry revenue is expected to increase at an annualized rate of 5.3%.

To counter seasonal volatility, many of the industry’s 14,475 operators have shifted to competing through added amenities. RV parks and campgrounds now offer a multitude of facilities, such as restaurants, swimming pools and game rooms, to attract new visitors. One of the industry’s larger companies, Outdoor Resorts of America, offers access to golf courses and spas. Consumer demand for more activities and amenities at RV parks and campgrounds has driven up capital costs, but have also allowed industry operators to compete during the off-season. While summer will remain the most popular time to visit campgrounds, increased revenue over the fall and winter months will allow operators to mitigate the higher capital costs required for building these amenities. Nevertheless, increased costs will result in falling industry profitability over the five years to 2016.

Summer Release- GrillHome Improvement Stores

2016 Growth Rate: 3.8%

With competition from online channels and large discount stores heating up, many operators in retailing industries have struggled to keep their doors open. However, over the past five years, an influx of housing starts and remodeling activity has boosted revenue for the Home Improvement Stores industry; as a result, industry revenue is expected to grow at an annualized rate of 3.8% during the period. In the warmer months, home improvement stores generate a significant portion of their sales not just from purchases of home improvement materials and supplies, but also from items such as barbecue grills, outdoor pool supplies and other leisure goods.

Revenue for the Home Improvement Stores industry is estimated to generate $164.1 billion in 2016. Major players Home Depot and Lowe’s dominate the industry; moreover, the two companies control a combined 83.0% of the market’s total sales. These companies both report elevated sales during the summer months, as consumers are more willing to engage in building and renovation projects when the weather tempers. To serve the influx of seasonal demand, home improvement stores boost the number of part-time workers to operate cashiers, stock shelves and provide customer service. According to the Bureau of Labor Statistics, home improvement store employment is typically 2.0% to 6.0% higher than average during the summer months.

Heating and Air Conditioning Contractors

2016 Growth Rate: 4.3%

Heating and air conditioning contractors primarily install and service heating, ventilation, air-conditioning and refrigeration equipment. According to the US Department of Energy, the price of electric power has increased at an annualized rate of 2.0% from 2011 to 2016. Rising electricity prices are expected to motivate households to use air-conditioning contractors to purchase or upgrade their systems to lower their electricity bills over the long term. Government-sponsored incentives (typically tax credits) increases demand for air-conditioning contractors, provided that new cooling systems meet certain energy-efficiency ratings (EERs). For example, current homeowners can receive a 10.0% of cost tax credit (up to $500) on EER central air-conditioning units through December 2016. As a result, industry operators received more contracts for replacing and upgrading systems in existing structures.

Additionally, the strong growth in the overall construction sector increased demand for heating and air-conditioning contractors. The Heating and Air-Conditioning Contractors industry (specifically air-conditioning contractors) has benefited greatly from new home installations of cooling systems, as well as from maintenance and repair work. Repair work is particularly lucrative during summer months as keeping air-conditioning units functional is considered essential to the quality of life. Over the five years to 2016, multiple tax incentives and a robust recovery in the construction market have boosted industry revenue at an annualized rate of 4.1% to $82.9 billion.

Movie TheatersMovie Theaters

2016 Growth Rate: 4.0%

In 2016, the Movie Theaters industry is expected to generate nearly $15.0 billion in revenue, with revenue increasing at an annualized rate of 4.0% in the five years to 2016. The movie theater business is highly seasonal and generates a significant portion of revenue in the summer season, during which studios release anticipated movies and sequels. Summer 2016 will include the release of films such as Warcraft, Teenage Mutant Ninja Turtles 2, Finding Dory, Independence Day 2, Tarzan, Ghostbusters and Star Trek Beyond. Watching movies in theaters continues to be a popular leisure activity, despite the increasing threat of streaming sites, such as Netflix and Amazon Prime, and rising average ticket prices. As evidenced by the films set to be released, theaters and film studios aim to capture the lucrative younger demographics during the summer holiday. According to the Motion Picture Association of America, children and adolescents between the ages of two and 17 collectively represent 23.0% of frequent moviegoers in 2015.

To maintain revenue growth and profitability, movie theaters have invested heavily in upgraded seating, expanded concession offerings and additional services such as dinner options and reserved seating. Theater operators realize that the evolving distribution model that has propelled the likes of Netflix, Amazon and Hulu continue to pose a significant threat to box-office attendance, and they must work hard to keep frequent moviegoers. Industry operators are shutting down unprofitable establishments and focusing their energies on larger multiplexes. In 2016, industry profit is anticipated to account for over 12.0% of revenue, mainly due to higher concession sales and ticket prices.

Remodeling

2016 Growth Rate: 5.9%

The Remodeling industry specializes in renovating or altering the interiors and exteriors of both single-family and multifamily homes. Consequently, industry operators are busiest in the summer months. According to the US Census Bureau, the value of home improvement construction expenditure is typically 20.0% higher than the yearly average in the fourth quarter. Warm weather is key for boosting industry demand. Many property owners take advantage of the lull in harsh weather conditions to make common repairs to the exterior of their homes in preparation for the winter months. Additionally, homeowners with outdoor living spaces are keen on making the most of their summer by expanding or updating decks, patios, pools or other recreational spaces.

Overall, the Remodeling industry has benefited from rising home prices around the country. The booming housing market directly influences Americans to spend more on renovation projects, as their return on investment increases in line with housing prices. Over the five years to 2016, IBISWorld projects that the US National Home Price Index, which measures changes in the selling price of new homes over a time given a constant level of quality, to rise an annualized 4.9%. As a result, the future of the Remolding industry is looking hot, with revenue expected to grow at an annualized rate of 5.9% in the five years to 2016.

Lingerie, Swimwear and Bridal Stores

2016 Growth Rate: 1.9%

The increased desire to cool down during the summer months typically heats up demand for the Lingerie, Swimwear and Bridal Stores industry. In recent years, the overall industry has performed well, regardless of the season; over the five years to 2016, IBISWorld estimates that revenue for lingerie, swimwear and bridal stores has increased at an annualized rate of 1.9%, totaling $17.0 billion. However, industry demand is particularly high in the summer months, when consumers flock to pools and sport the typical swimwear uniform.

Swimwear is typically considered a discretionary purchase, and is retailed at various price points. Therefore, as per capita disposable income has increased at an annualized rate of 1.5% over the five years to 2016, consumers have been more willing to splurge on new and expensive swimwear. Although swimwear sales only account for an estimated 23.0% of revenue for the Lingerie, Swimwear and Bridal Stores industry, the segment alone brings in nearly $4.0 billion, with a large portion of sales occurring during the hot summer months.

Amusement ParksAmusement Parks

2016 Growth Rate: 2.0%

The Amusement Parks industry, which consists of theme parks and water parks that provide thrill rides, animal exhibits and other attractions, is highly dependent on seasonal factors, such as weather and school vacation dates. Therefore, the industry is subject to high revenue volatility throughout the calendar year. This is especially true in northern states, where cold weather forces parks to close by September or October. Most amusement parks are open between late spring and early fall to accommodate the school holiday rush. For example, Six Flags, which operates 14 amusement parks in the United States and holds a 7.5% market share, earns 80.0% of its revenue between Memorial Day and Labor Day.

To mitigate the industry’s high seasonal volatility, combination indoor/outdoor parks have become increasingly popular. While summer will always be the most popular time to visit water parks, savvy operators learned they can earn revenue year-round with water attractions in heated, indoor environments. Indoor water parks are expensive to develop and maintain, however, the extra revenue earned through indoor attractions will more than cover the rising outlays. Overall, IBISWorld projects industry revenue to grow an annualized 2.0% to $16.0 billion over the five years to 2016.

Sunscreen Manufacturing

2016 Growth Rate: 2.1%

Sunscreen manufacturers prepare, blend, compound and package sun protection lotion, cream, spray or other topical applications to protect the skin from harmful, cancer-causing ultraviolet rays and help prevent sunburn. In the United States, the Sunscreen Manufacturing industry earns an estimated $399.2 million annually, with multinational consumer goods manufacturers Bayer AG and Johnson & Johnson representing the largest domestic sunscreen producers. Growing awareness regarding the risk of skin cancer and aging associated with UV rays has spurred an increasing number of consumers to use sunscreen year-round over the past decade. Sales of lotions, creams, balms and cosmetic skin products offering protection from the sun have enhanced the industry’s strength, even during colder months.

However, customer orders for sun-care products remain highly seasonal, which has historically resulted in higher sales during the hottest months. Heightened demand for premium products, such as aerosol sprays and skin protection exceeding a sun-protection factor (SPF) of 70, has provided the industry with steady year-over-year growth. This is despite the Food and Drug Administration insisting that there is not enough data to support manufacturer claims that SPF values greater than 50 provide any measurable additional protection. The industry is expected to grow at an annualized rate of 2.2% over the next five years.

About IBISWorld Inc.

Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit www.ibisworld.com or call 1-800-330-3772.

9-summer-industries

2016 Summer Industries PDF