The performance of consumer discretionary businesses is closely linked to economic cycles. Over the past six months, it seems like demand trends are working against their favor as the industry has tumbled by 8.6%. This drawdown was worse than the S&P 500’s 1% decline.
While some companies have durable competitive advantages that enable them to grow consistently, the odds aren’t great for the ones we’re analyzing today. Keeping that in mind, here are three consumer stocks we’re passing on.
Ralph Lauren (RL)
Market Cap: $20.2 billion
Originally founded as a necktie company, Ralph Lauren (NYSE: RL) is an iconic American fashion brand known for its classic and sophisticated style.
Why Are We Out on RL?
- Weak constant currency growth over the past two years indicates challenges in maintaining its market share
- Operating margin of 13.7% falls short of the industry average, and the smaller profit dollars make it harder to react to unexpected market developments
- Poor free cash flow margin of 11.9% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
Ralph Lauren is trading at $336.91 per share, or 19.7x forward P/E. To fully understand why you should be careful with RL, check out our full research report (it’s free).
Wynn Resorts (WYNN)
Market Cap: $10.35 billion
Founded by the former Mirage Resorts CEO, Wynn Resorts (NASDAQ: WYNN) is a global developer and operator of high-end hotels and casinos, known for its luxurious properties and premium guest services.
Why Do We Pass on WYNN?
- Annual revenue growth of 4.5% over the last two years was below our standards for the consumer discretionary sector
- Low free cash flow margin of 11.9% for the last two years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- High net-debt-to-EBITDA ratio of 6× could force the company to raise capital at unfavorable terms if market conditions deteriorate
At $99.58 per share, Wynn Resorts trades at 19.5x forward P/E. If you’re considering WYNN for your portfolio, see our FREE research report to learn more.
Xponential Fitness (XPOF)
Market Cap: $218.3 million
Owner of CycleBar, Rumble, and Club Pilates, Xponential Fitness (NYSE: XPOF) is a boutique fitness brand offering diverse and specialized exercise experiences.
Why Should You Sell XPOF?
- Flat sales over the last two years suggest it must innovate and find new ways to grow
- Persistent operating margin losses suggest the business manages its expenses poorly
- Free cash flow margin is projected to show no improvement next year
Xponential Fitness’s stock price of $5.86 implies a valuation ratio of 8.4x forward P/E. Dive into our free research report to see why there are better opportunities than XPOF.
High-Quality Stocks for All Market Conditions
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
Find out which 5 stocks it's flagging for this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.
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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
