4 Consumer Discretionary Stocks Poised for Growth in 2025

Industry Overview - The Consumer Products-Discretionary industry is dynamic, influenced by changing consumer preferences, economic conditions, and innovation [1] - The industry is cyclical, directly correlated with the economy, targeting middle-to-higher-income groups with high-priced discretionary products [3] - Key product categories include fashion, jewelry, home and art products, health and personal care products, and pet supplies [3] Consumer Spending Trends - Consumer spending in discretionary categories is expected to remain strong as inflationary pressures ease and labor markets are resilient [1] - In January, the U.S. economy added 143,000 jobs, with average hourly earnings increasing by 4.1% year-over-year, contributing to consumer spending resilience [4] Key Industry Trends - Companies focusing on digital transformation, sustainability, and unique customer experiences are well-positioned for growth [2] - Brand enhancement and capital discipline are critical, with companies deepening consumer engagement and optimizing operational efficiency [5] - The industry is fragmented, with companies investing in digital ecosystems to gain competitive advantages, although this may compress margins due to high costs [6] Market Performance - The Zacks Consumer Products-Discretionary industry ranks 83, placing it in the top 33% of over 250 Zacks industries, indicating robust near-term prospects [7][8] - The industry's earnings estimate has risen by approximately 2% since the beginning of 2025, reflecting growing analyst confidence [9] Stock Performance - Over the past year, the industry has increased by 15.3%, underperforming the S&P 500's rise of 23.2% and the broader sector's increase of 18% [10] - The industry currently trades at a forward 12-month price-to-sales (P/S) ratio of 3.26X, compared to the S&P 500's 5.37X and the sector's 2.26X [12] Notable Companies - Central Garden & Pet Company: Positioned as a leader in pet and lawn supplies, focusing on brand building and cost management, with expected sales growth of 1% and earnings growth of 8.4% [14][15] - The Honest Company: Demonstrates strong growth through strategic initiatives, with expected sales growth of 8.9% and earnings growth of 82.9% [17][19] - The RealReal: Reports strong preliminary financial results with GMV reaching $503.5 million, exceeding guidance, and expected sales growth of 9.1% [21][22] - Interparfums: Focuses on brand positioning and market reach, with expected sales growth of 10.3% and earnings growth of 8.2% [24][25]