Zacks

4 Stocks to Track Despite Consumer Products-Discretionary Industry Woes

Sumit Singh
7 min read

In This Article:

Consumer spending activity, which is one of the pivotal factors driving the economy, has somewhat slowed down. This is because inflation and recession-wary shoppers have curtailed spending. Underlying price pressure, a slowing labor market and a higher interest rate environment have cooled demand. Of late, players in the Zacks Consumer Products-Discretionary industry have been encountering these headwinds.

To navigate troubled waters, industry participants have been directing resources toward digital platforms and augmenting the supply chain. Companies have been focusing on a superior product strategy, the advancement of omnichannel capabilities and prudent capital investments. Backed by these initiatives, companies like Prestige Consumer Healthcare Inc. PBH, Traeger, Inc. COOK, The RealReal, Inc. REAL and Genius Brands International, Inc. GNUS are set to cash in on the opportunities.

About the Industry

The Consumer Products-Discretionary industry has a direct correlation with the economy, thus making it cyclical. Discretionary products generally command high prices, with middle-to-higher-income groups being the targeted customers. The industry comprises companies that offer product categories, including fashion, jewelry and watches, and other home and art products. Quite a few players develop, manufacture, market and sell over-the-counter health and personal care products. Some even manufacture and distribute party goods. There are companies that design, source and distribute licensed pop culture products too. Some industry participants also produce and distribute various products for the lawn and garden and pet supplies markets. Companies sell products to specialty retailers, mass-market retailers and e-commerce sites.

3 Key Trends to Watch in the Industry

Soft Demand May Hit Revenues: Elevating prices and geopolitical concerns continue to pose a threat to consumer spending activity. Undoubtedly, the industry’s prospects are correlated with the purchasing power of consumers. However, rising prices have been discomforting family budgets. The Fed’s aggressive rate hikes to tame inflation also made things tough for consumers by squeezing disposable income. Consequently, the demand for discretionary products has softened. Per the Commerce Department, U.S. retail and food service sales in March declined 1% sequentially to $691.7 billion. March retail sales data marked the second straight month of a decline in spending. The decline was steeper than expected, with spending on categories such as automobiles, home furnishing, electronic stores and building supplies taking a hit.

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