With evolving customer demands, rising personal expenditure, and a preference for luxury fashion and goods, the consumer discretionary industry is experiencing robust growth and is diversifying its operations.
Amid this backdrop, investors could consider investing in sound consumer discretionary stocks Amazon.com, Inc. (AMZN), Ross Stores, Inc. (ROST), and Crocs, Inc. (CROX) before the holiday season.
The consumer discretionary market, which encompasses non-essential but desirable products like luxury fashion, goods, and household products, primarily benefits from economic recovery and rising disposable incomes. Personal consumption expenditures constitute about 68% of the nation’s GDP in 2024, boosted by a solid job market, low unemployment, and wage increases.
Further, the growing internet penetration has resulted in a rapid increase in the online shopping and e-commerce market in the U.S. With over 33% of the world’s population online, e-commerce has become a $6 trillion industry and will likely hit $8 trillion by 2027. In global comparison, the US retail e-commerce sales accounted for $579.45 billion in the first half of 2024.
The US e-commerce sales were $291.60 billion in the second quarter, representing a 0.82% increase from the prior quarter and a 6.8% increase from the last year.
Besides, with growing disposable income and changing consumer preferences, the luxury fashion market is poised to grow. According to IMARC Group, the market is anticipated to grow to $327.10 billion by 2032 at a CAGR of 3.1%. The market growth can be attributed to rising affluent consumers, growing exclusivity aspiration, and increasing influence of social media and digital platforms.
Given these favorable market trends, let’s look at the fundamentals of the top consumer discretionary stocks such as AMZN, ROST, and CROX.
Amazon.com, Inc. (AMZN)
AMZN is engaged in retail, selling consumer products, advertising, and subscription services through online and physical stores internationally. The company operates in three segments: North America; International; and Amazon Web Services (AWS).
On September 5, AMZN’s Amazon Web Services, Inc. (AWS) announced that the Central Japan Railway Company (JR Central), which provides high-speed railway services, has selected AWS technologies to enhance operations for its Yamanashi Maglev Line.
JR Central will advance its data-driven operations, drive operational efficiencies, and reduce maintenance costs with the help of AWS’ technological capabilities.
On August 22, AWS launched the AWS Asia Pacific (Malaysia) Region. With the launch, developers, startups, entrepreneurs, enterprises, government, education, and NPOs can leverage AWS data centers to run their applications and serve end users.
For the second quarter that ended June 30, 2024, AMZN’s total net sales increased 10.1% year-over-year to $147.98 billion. Its operating income grew 91% from the year-ago value to $ 14.67 billion. The company’s net income and EPS came in at $13.48 billion and $1.26, up 99.8% and 93.8% from the prior year’s quarter, respectively.
Street expects AMZN’s revenue and EPS for the third quarter (ending September 2024) to increase 9.9% and 20.6% year-over-year to $157.18 billion and $1.13, respectively. Further, the company surpassed the consensus EPS estimates in all four trailing quarters, which is impressive.
AMZN’s stock has increased 12.3% over the past month and 32.4% over the past year to close the last trading session at $187.
AMZN’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has an A grade for Sentiment. It also has a B grade for Momentum and Quality. Within the B-rated Internet industry, AMZN is ranked #14 among the 53 stocks.
Click here to access additional ratings of AMZN for Value, Growth, and Stability.
Ross Stores, Inc. (ROST)
ROST operates off-price retail apparel and home fashion stores under the Ross Dress for Less and dd's DISCOUNTS brands. The company’s stores primarily offer apparel, accessories, footwear, and home fashions.
On August 21, ROST’s Board of Directors declared a quarterly cash dividend of $0.37 per common share, payable on September 30, 2024, to stockholders of record as of September 10, 2024.
ROST pays an annual dividend of $1.47, which translates to a yield of 0.96% at the current share price. Its four-year average dividend yield is 0.94%. Moreover, the company’s dividend payouts have increased at a CAGR of 18.9% over the past three years.
On July 22, ROST announced that the company opened 21 Ross Dress for Less® and 3 dd's DISCOUNTS® stores across 17 different states in June and July. The new locations are part of its plan to add 90 new stores during fiscal 2024.
During the second quarter that ended August 3, 2024, ROST’s sales increased 7.1% year-over-year to $5.29 billion. The company’s net earnings and EPS amounted to $527.15 million and $1.59, indicating increases of 18.1% and 20.5% from the prior year’s quarter, respectively.
Furthermore, the company’s total assets stood at $14.68 billion as of August 3, 2024, compared to $13.99 billion as of July 29, 2023.
Street expects ROST’s EPS for the third quarter (ending October 2024) to increase 6.6% year-over-year to $1.42. For the same quarter, the company’s revenue is expected to grow 5.2% year-over-year to $5.18 billion. Moreover, it has surpassed the consensus revenue and EPS estimates in all four trailing quarters.
ROST’s shares have gained 7.5% over the past month and 28.9% over the past year to close the last trading session at $152.68.
ROST’s POWR Ratings reflect its sound prospects. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
ROST has a B grade for Sentiment, Momentum, and Quality. It is ranked #18 out of 58 stocks in the B-rated Fashion & Luxury industry.
In addition to the POWR Ratings we’ve stated above, we also have other ratings of ROST for Growth, Stability, and Value. Get all ROST ratings here.
Crocs, Inc. (CROX)
CROX designs, develops, manufactures, markets, distributes, and sells footwear and accessories for men, women, and children under the Crocs and HEYDUDE brands internationally. It offers wide footwear products, like clogs, sandals, slides, flips, wedges, platforms, socks, boots, charms, flip-flops, sneakers, and slippers.
CROX’s trailing-12-month EBIT margin and net income margin of 26.36% and 20.02% are 234.6% and 342.7% higher than the industry averages of 7.88% and 4.52%, respectively. Also, the stock’s trailing-12-month gross profit margin of 57.11% is higher than the 37.16% industry average.
For the second quarter that ended on June 30, 2024, CROX’s revenues rose 3.6% year-over-year to $1.11 billion, and its non-GAAP gross profit grew 9.5% year-over-year to $681.92 million. The company’s income from operations of $325.74 million reflects 2.3% growth from the prior-year quarter.
In addition, the company’s non-GAAP net income came in at $243.64 million and $4.01 per common share, up 8.4% and 11.7% year-over-year, respectively.
According to the financial outlook for the third quarter, CROX expects Crocs Brand to grow 3% to 5% year-over-year. And its adjusted earnings per share is expected to range from $2.95 to $3.10.
Also, for the full year 2024, revenue growth is 3% to 5% compared to 2023, where revenues from the Crocs Brand are projected to grow 7% to 9%. The company has updated its adjusted EPS to $12.45 - $12.90 compared to the prior guidance of $12.25 - $12.73.
Street expects CROX’s revenue and EPS for the fourth quarter (ending December 2024) to increase 6.9% and 5.1% year-over-year to $1.03 billion and $2.71, respectively. Also, the company has topped the consensus EPS and revenue estimate in all of the trailing quarters, which is impressive.
Shares of CROX have surged 1.7% over the past six months and 39.1% over the past year to close the last trading session at $127.73.
CROX’s POWR Ratings reflect its sound fundamentals. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
CROX has a B grade for Quality and Sentiment. It is ranked #11 out of 58 stocks in the B-rated Fashion & Luxury industry.
In addition to the POWR Ratings we’ve stated above, we also have CROX ratings for Momentum, Value, Growth, and Stability. Get all CROX ratings here.
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AMZN shares were trading at $186.69 per share on Friday afternoon, down $0.31 (-0.17%). Year-to-date, AMZN has gained 22.87%, versus a 19.02% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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