America's birth rate> is falling. Its incomes are stagnant. Even its illegal immigration has slowed. Companies that want to grow their sales in this economy had better be able to steal customers from rivals.
The beer maker, air carrier and grocer listed below are doing just that. Recent sales figures for each far exceed industry averages. Analysts confirm these companies are taking market share. Whether that makes their shares worth buying, of course, depends on a variety of other factors starting with valuation. On that score, the flyer seems a better deal than the brewer and retailer. It's the only company whose shares haven't trounced the broad market's performance over the past year, partly because the soaring price of oil has sent airlines in general slumping.
Boston Beer Company
Sales growth, past four quarters: 12%
Industry sales growth: 5%
In September 2008 I predicted that Molson Coors (TAP) shares would outperform Boston Beer (SAM), despite the latter making better beer, because the former had lower prices and costs and a more modest stock valuation. I was right for about the first year. Since then I haven't even been close. Consumers didn't trade down to cheaper beer during the recession, and during the current recovery, "better beer," as Boston Beer calls the category that includes its Sam Adams line, has grown much faster than beer in general. Over the past year shares of Boston Beer have gained 69%, versus 15% for shares of Molson Coors. Boston Beer isn't cheap at 25 times forecast earnings, but last year the company increased sales by 12% while larger rivals reported weak or negative growth. Over the past few years the company has shifted from mostly contract brewing to nearly all in-house brewing, reduced delivery times and improved margins. Management is also pushing new "better than better" beers, including its cork-bottle Barrel Room Collection and its $20-a-bottle Infinium Ale.
Sales growth, past four quarters: 18%
Industry sales growth: 15%
Southwest Airlines (LUV) gained leading market share in dozens of airports by cutting frills (including assigned seating) and offering low fares, and by avoiding crowded hubs. Major carriers have slashed perks of late, too, but Southwest is still growing faster. On Wednesday, the company announced that it received regulatory approval for its proposed merger with discount carrier AirTran. Analysts say the deal offers plenty of opportunity for profitable growth, because Southwest's non-hub model leaves little city overlap. Sales are expected to rise 15% this year, compared with 10% for American Airlines parent AMR (AMR) and 9% for United Continental (UAL) . Rising oil prices look likely to crimp profits, however. Wall Street expects earnings per share to decline 8% this year. The stock seems reasonably priced, nonetheless. Southwest has no net debt and its shares sell for about 0.7 times yearly sales. That's a 60% discount to the broad stock market.
Sales growth, past four quarters: 14%
Industry sales growth: 5%
Wondering who sells that aforementioned $20-a-bottle beer? Whole Foods (WFMI) does. The upscale grocer specializes in markets with higher-income shoppers who are willing to pay up for organic and specialty fare. It, too, got clobbered during the recent recession but has made a remarkable recovery. Read into that what you will about U.S. spending habits or income inequality, but while Kroger (KR) and Safeway (SWY) are expected to make do with 6% sales growth in their current fiscal year, Whole Foods is forecast to increase sales twice as fast. Its profit margins are nearly double those of traditional grocers. Shares, alas, are priced like Parmigiano Reggiano. They sell for 36 times earnings, making them slightly more than twice as expensive as the average stock.