The performance of consumer discretionary businesses is closely linked to economic cycles. Unfortunately, the industry’s recent performance suggests demand may be fading as discretionary stocks have pulled back by 4.1% over the past six months. This performance was discouraging since the S&P 500 returned 5.4%.
Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. With that said, here is one consumer stock boasting a durable advantage and two we’re passing on.
Two Consumer Discretionary Stocks to Sell:
Skechers (SKX)
Market Cap: $9.45 billion
Synonymous with "dad shoe", Skechers (NYSE: SKX) is a footwear company renowned for its comfortable, stylish, and affordable shoes for all ages.
Why Should You Dump SKX?
- Underwhelming constant currency revenue performance over the past two years suggests its product offering at current prices doesn’t resonate with customers
- Estimated sales growth of 4.9% for the next 12 months implies demand will slow from its two-year trend
- Diminishing returns on capital suggest its earlier profit pools are drying up
Skechers’s stock price of $62.94 implies a valuation ratio of 18x forward P/E. Dive into our free research report to see why there are better opportunities than SKX.
American Outdoor Brands (AOUT)
Market Cap: $116.9 million
Spun off from Smith and Wesson in 2020, American Outdoor Brands (NASDAQ: AOUT) is an outdoor and recreational products company that offers outdoor and shooting sports products but does not sell firearms themselves.
Why Do We Pass on AOUT?
- Lackluster 5.8% annual revenue growth over the last five years indicates the company is losing ground to competitors
- Earnings per share have contracted by 23.9% annually over the last four years, a headwind for returns as stock prices often echo long-term EPS performance
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
American Outdoor Brands is trading at $9.34 per share, or 15.7x forward P/E. To fully understand why you should be careful with AOUT, check out our full research report (it’s free).
One Consumer Discretionary Stock to Watch:
Live Nation (LYV)
Market Cap: $36.75 billion
Owner of Ticketmaster and operator of music festival EDC, Live Nation (NYSE: LYV) is a company specializing in live event promotion, venue management, and ticketing services for concerts and shows.
Why Should LYV Be on Your Watchlist?
- Remarkable 24% revenue growth over the last five years demonstrates its ability to capture significant market share
- Additional sales over the last five years increased its profitability as the 26% annual growth in its earnings per share outpaced its revenue
- Returns on capital are climbing as management makes more lucrative bets
At $159.25 per share, Live Nation trades at 48.2x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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