For Subscribers

Get the complete article now!

Five analysts and top management from sixteen sector firms examine the Leisure Goods & Services sector in this special 89-page issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info384.htm.

TWST: Scott, let’s start with a brief introduction to the approach that you take to the leisure industry.

Mr. Barry: That’s a great place to start because the “leisure group” isn’t really a group, per se. For example, it’s not as if we would ever go on the system and upgrade the leisure industry. We look at the space as a group of fairly disparate subsegments that are tied together by a single thread, which is consumer discretionary income. In fact, if you look at our coverage universe right now, we’re arguably in six different industry subsegments within the broader leisure category, including cruise, ski resorts, motor sports/location-based entertainment, boat manufacturing, motorcycle manufacturing and toys. While we are well aware of the top-down dynamics driving the space, the leisure segment very much lends itself to a bottom-up approach. And that’s really the approach we take with all the companies we cover. We diligently keep tabs on the fundamentals in each of these different subsegments and try to understand the individual companies as thoroughly as possible. At the end of the day, we think it’s an idea-driven space, which lends itself to stock picking.

TWST: Let’s go back to the single thread that you referred to that ties these subsegment together — consumers’ discretionary income. What do you expect the consumer to be doing in the second half of 2001 and further out into 2002?

Mr. Barry: That’s certainly a very topical question right now. Like many others, we think the macroeconomic outlook hinges on what happens in the second half with regard to consumer spending. We’re actually fairly constructive on consumer spending, particularly when it comes to spending on leisure. Leisure spending across the board has been fairly resilient during the recent macroeconomic contraction, although each subsegment has been impacted to varying degrees, and we anticipate it will continue to hold up into the second half of the year. One of the things that we’ve found, particularly when it comes to the vacation travel segment, is that time as a currency has become equally as important to the consumer as money. By that I mean that scarce leisure time has become increasingly valuable to the consumer. For instance, here in the United States we have about 13 vacation days a year. And we’re finding that even in a downturn, consumers are still going to take their vacations, and they’re still going to spend. That’s not to say that you don’t see consumers become more value-conscious, and in fact that’s exactly what we’ve been seeing. But we’re still seeing spending, particularly in the vacation travel segments.

TWST: Let’s move from the boating retailer to the boat builder. What’s the outlook for Brunswick at this point?

Mr. Barry: Long term, we think the risk/reward in Brunswick (NYSE:BC) is among the most attractive in our entire leisure coverage universe. Brunswick currently offers a powerful combination of positive company-specific change and the potential for fundamental improvement when we eventually see a cyclical recovery. That’s a pretty powerful combination. We believe Brunswick’s new management has repositioned this previously mismanaged franchise appropriately. They’re looking to leverage their core competency in marine engine and boat manufacturing. We believe the company, defined as a world class global marine engine and boat manufacturing company, has the potential to drive significant improvement in its operating and financial metrics over the next several years. And if you combine that company-specific improvement with a cyclical recovery in the boating industry, the long-term earnings power at Brunswick is powerful.

This special issue includes:

1) Leisure Goods & Services - In an in-depth (4,100 words) Analyst Interview, Timothy Conder, Vice President at A.G. Edwards & Sons, Inc., examines the outlook for the sector and shares specific stock recommendations.

2) Leisure Industry Overview - In an in-depth (3,700 words) Analyst Interview, Hayley Kissel, Director of Merrill Lynch's Global Securities Research and Economics Division, examines the outlook for the sector and shares specific stock recommendations.

3) Outlook for Leisure Stocks - In an in-depth (3,900 words) Analyst Interview, Scott Barry, Director in Credit Suisse First Boston's Equity Research group, examines the outlook for the sector and shares specific stock recommendations.

4) Cruise Lines & Motor Sports - In an in-depth (2,600 words) Analyst Interview, Joseph Hovorka, Senior Analyst at Raymond James & Associates, examines the outlook for the sector and shares specific stock recommendations.

5) Outlook for Cruise Lines - In an in-depth (4,100 words) Analyst Interview, Robin Farley, Executive Director in the equity research division of UBS Warburg, examines the outlook for the sector and shares specific stock recommendations.

6) CEO interviews (average 2,500 words). Top management of sixteen sector firms examine the outlook for their firm and the sector.