Consumer discretionary businesses are levered to the highs and lows of economic cycles. Thankfully for the industry, demand trends seem to be healthy as discretionary stocks have gained 11.6% over the past six months. This performance has nearly mirrored the S&P 500.
Regardless of these results, investors should tread carefully as many companies in this space are unpredictable because they lack recurring revenue business models. On that note, here are three consumer stocks we’re swiping left on.
Caleres (CAL)
Market Cap: $467.1 million
The owner of Dr. Scholl's, Caleres (NYSE: CAL) is a footwear company offering a range of styles.
Why Are We Out on CAL?
- Sales trends were unexciting over the last five years as its 3.8% annual growth was below the typical consumer discretionary company
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
- 7× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
At $13.78 per share, Caleres trades at 13.1x forward P/E. To fully understand why you should be careful with CAL, check out our full research report (it’s free).
La-Z-Boy (LZB)
Market Cap: $1.62 billion
The prized possession of every mancave, La-Z-Boy (NYSE: LZB) is a furniture company specializing in recliners, sofas, and seats.
Why Should You Dump LZB?
- Annual revenue growth of 5.8% over the last five years was below our standards for the consumer discretionary sector
- Free cash flow margin is not anticipated to grow over the next year
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
La-Z-Boy’s stock price of $39.30 implies a valuation ratio of 13.4x forward P/E. If you’re considering LZB for your portfolio, see our FREE research report to learn more.
WeightWatchers (WW)
Market Cap: $236.8 million
Known by many for its old cable television commercials, WeightWatchers (NASDAQ: WW) is a wellness company offering a range of products and services promoting weight loss and healthy habits.
Why Should You Sell WW?
- Demand for its offerings was relatively low as its number of members has underwhelmed
- Earnings per share decreased by more than its revenue over the last five years, showing each sale was less profitable
- Negative free cash flow raises questions about the return timeline for its investments
WeightWatchers is trading at $23.50 per share, or 16.6x forward P/E. To fully understand why you should be careful with WW, check out our full research report (it’s free).
Stocks We Like More
Check out the high-quality names we’ve flagged in our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
