Labor Day 2013 Stock Market Winners

August 29, 2013 by Jon C. Ogg

cash register, not full
Source: thinkstock
Labor Day is always an interesting holiday, and it has serious ramifications on consumer spending and on the economy. The 2013 back-to-school spending has been down after a record 2012, and this leaves a lot of room for upside and for disappointment for retailers and businesses who prosper from spending habits around Labor Day. The holiday travel period for 2013 is defined as Thursday, August 29, through Monday, September 2. 24/7 Wall St. has used data from the National Retail Federation (NRF), AAA, the Conference Board, and the U.S. Bureau of Labor Statistics (BLS).

If you look at the AAA site, Labor Day spending for 2013 looks to be up in most categories from 2012. If you have seen data from the national Retail Federation, there is more caution. We also could not help but notice that the real measure of consumer confidence was far more optimistic than what preliminary reports indicated. We were extremely selective on naming any retail outlets that would thrive because the guidance from so many giants in the industry was so cautious. Here are five winning companies for Labor Day weekend spending by our take, in alphabetical order:

Avis Budget Group, Inc. (NYSE: CAR) is an obvious winner, particularly after selling off more than 4% on Tuesday. That is now down 20% from its highs. If car rental rates are up 30% and they still are mostly sold out, that is called a license to gouge. If you are traveling around and need to drive, hitchhiking is not legal in many places now.

DineEquity Inc. (NYSE: DIN) seems to be a likely winner if travelers will be spending more. With some 3,600 Applebee’s and IHOP restaurant chain locations offering meals for the “budget-minded but not fast food” crowd, the 15% sell-off from highs earlier in 2013 seems to be a possible gift now that its dividend yield is up at 4.5%. Analysts on average see upside of almost 20% for this restaurant chain.

Starbucks Corp. (NASDAQ: SBUX) seems an obvious choice if more people will be driving. How do you stay up for a long 200 to 300 mile drive? The legal way is coffee. Starbucks shares are now down 5% from their highs, as well due to the market sell-off. If Americans are going on a long driving trip, their favorite coffee is likely to end up in their stomachs.

Starwood Hotels & Resorts Worldwide Inc. (NYSE: HOT) is a winner if the higher end rooms are working better than the lower-end room rates. Its hotels and destinations include sucn brands as St. Regis, The Luxury Collection, W, Westin, Le Méridien, Sheraton, Four Points and Element. After a drop of almost 4% on Tuesday, this stock is down 10% from its highs as well, and analysts have upside of about 15% expected for its investors.

TravelCenters of America LLC (NYSE: TA) is small enough that it is often overlooked by travel and leisure investors. It has about 500 stores owned or franchised under the TravelCenters of America, TA and Petro Stopping Centers brand names. It caters to long-distance drivers, RVs and truckers on the interstates.

There is good news for gas stations around the nation. AAA is predicting that the 2013 Labor Day weekend will have the highest number of travelers since the recession. It projected that some 34.1 million Americans will travel more than 50 miles from home over the upcoming Labor Day holiday. If it comes true, that is a 4.2% gain over the 32.7 million people who traveled last year, due mostly to increased consumer spending and the improving housing market, according to the AAA report. As far as why this is a win for gas station owners, AAA predicted that some 85% of the travelers will travel by automobile. That is up 4.3% from a year ago, and it will offset what was put as a 2.7% average decline in gas prices versus a year ago. Again, TravelCenters of America LLC (NYSE: TA) seems to likely winner.

Median spending is expected to grow to $804 from $749 last year, according to AAA. Hotels will be enjoying much of that gain. Travelers are expected to spend 24% of their budget on transportation and lodging. Food and beverages will account for 21% of the budget. Additional breakdowns are as follows for the most popular activities:

  • Dining at 57% — DineEquity Inc. (NYSE: DIN) for IHOP and Applebee’s
  • Visiting with friends/family at 46%
  • Shopping at 43%.

Airlines are not going to have as much of a boost, as AAA predicted that air travel is expected to rise by almost 3% to 2.61 million travelers. Airfares are up 4%, with an average lowest round-trip rate of $214 for the top 40 U.S. air routes, versus $205 in 2012. Sorry, but maybe only Priceline.com Inc. (NASDAQ: PCLN) is the winner here. Even then, only maybe.

Car rental companies are huge winners for Labor Day when you see this. The AAA Leisure Travel Index shows that weekend daily car rental rates will average $51 per day, a gain of 32% from 2012. Maybe the Department of Justice should have blocked car rental mergers on top of airline mergers. Again, think Avis Budget Group, Inc. (NYSE: CAR).

The mix in hotel rates will be hard to identify winners and losers because of so many price point overlaps. AAA Three Diamond rates are expected to be up 4% to an average of $161 per night. The average hotel rate for AAA Two Diamond hotels are expected to be down by 2%, averaging $115 per night. Priceline.com Inc. (NASDAQ: PCLN) is up massively this year, but it keeps backing away from that $1,000 share price. Again, Starwood Hotels & Resorts Worldwide Inc. (NYSE: HOT) seems our most likely winner here.

Now go to the National Retail Federation and things are a bit different. The NRF spokesperson called this cautious conservatism and called this an “either/or” economy on spending. The NRF said:

Given consumers’ continued concerned with their macro and micro environment, I think we’ll see shoppers this fall — and into the holiday season — continue to keep an eye out for promotions and make thoughtful, targeted purchases that keep them in line with their budgets.

After all the concerns in guidance from Wal-Mart Stores Inc. (NYSE: WMT) and Target Corp. (NYSE: TGT), we chose not identify any of the big giant retail destination chains. If shopping was only responded to as a top thing by 43% and behind visiting friends and family, then it seems obvious that the nearly no-cost visit will win out over retail shops.

As far as who we are celebrating exactly, the BLS showed the following statistics for workers as of May 2012, who will mostly be working over this holiday weekend:

  • Retail salespeople: 4,340,000
  • Cashiers: 3,314,010
  • Combined food preparation and serving workers, including fast food: 2,943,810
  • Waiters and waitresses: 2,332,020