The performance of consumer discretionary businesses is closely linked to economic cycles. This sensitive demand profile can cause discretionary stocks to plummet when macro uncertainty enters the fray, and over the past six months, the industry has shed 5.8%. This performance was worse than the S&P 500’s 1% fall.

Investors should tread carefully as many companies in this space are also unpredictable because they lack recurring revenue business models. Keeping that in mind, here are three consumer stocks we’re steering clear of.

Hasbro (HAS)

Market Cap: $9.22 billion

Credited with the creation of toys such as Mr. Potato Head and the Rubik’s Cube, Hasbro (NASDAQ: HAS) is a global entertainment company offering a diverse range of toys, games, and multimedia experiences for children and families.

Why Is HAS Risky?

1. Annual revenue declines of 3.5% over the last five years indicate problems with its market positioning
2. Historical operating losses point to an inefficient cost structure
3. Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results

Hasbro’s stock price of $67.01 implies a valuation ratio of 15.7x forward P/E. If you’re considering HAS for your portfolio, see our FREE research report to learn more.

Funko (FNKO)

Market Cap: $280.1 million

Boasting partnerships with media franchises like Marvel and One Piece, Funko (NASDAQ: FNKO) is a company specializing in creating and distributing licensed pop culture collectibles.

Why Do We Think FNKO Will Underperform?

1. Products and services have few die-hard fans as sales have declined by 10% annually over the last two years
2. Earnings per share fell by 14.9% annually over the last five years while its revenue grew, showing its incremental sales were much less profitable
3. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned

At $5.37 per share, Funko trades at 24.6x forward P/E. Read our free research report to see why you should think twice about including FNKO in your portfolio.

Clarus (CLAR)

Market Cap: $130.2 million

Initially a financial services business, Clarus (NASDAQ: CLAR) designs, manufactures, and distributes outdoor equipment and lifestyle products.

Why Are We Out on CLAR?

1. Products and services aren't resonating with the market as its revenue declined by 17.4% annually over the last two years
2. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 16.5% annually
3. Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value

Clarus is trading at $3.53 per share, or 8.7x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why CLAR doesn’t pass our bar.

Stocks We Like More

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like 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 176% over the last five years.

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 Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free.