Consumer discretionary businesses are levered to the highs and lows of economic cycles. Unfortunately, the industry’s recent performance suggests demand may be slowing as discretionary stocks’ 14.8% return over the past six months has trailed the S&P 500 by 4.6 percentage points.

Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. With that said, here is one consumer stock boasting a durable advantage and two we’re passing on.

Two Consumer Discretionary Stocks to Sell:

Pool (POOL)

Market Cap: $9.25 billion

Founded in 1993 and headquartered in Louisiana, Pool (NASDAQ: POOL) is one of the largest wholesale distributors of swimming pool supplies, equipment, and related leisure products.

Why Do We Avoid POOL?

1. Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
2. Anticipated sales growth of 3.1% for the next year implies demand will be shaky
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

Pool is trading at $249.98 per share, or 21.7x forward P/E. To fully understand why you should be careful with POOL, check out our full research report (it’s free for active Edge members).

Lovesac (LOVE)

Market Cap: $191.5 million

Known for its oversized, premium beanbags, Lovesac (NASDAQ: LOVE) is a specialty furniture brand selling modular furniture.

Why Are We Hesitant About LOVE?

1. 1.6% annual revenue growth over the last two years was slower than its consumer discretionary peers
2. Poor free cash flow margin of 0.6% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
3. Eroding returns on capital suggest its historical profit centers are aging

At $13.11 per share, Lovesac trades at 50.4x forward P/E. Read our free research report to see why you should think twice about including LOVE in your portfolio.

One Consumer Discretionary Stock to Watch:

Royal Caribbean (RCL)

Market Cap: $69.15 billion

Established in 1968, Royal Caribbean Cruises (NYSE: RCL) is a global cruise vacation company renowned for its innovative and exciting cruise experiences.

Why Does RCL Stand Out?

1. Impressive 30% annual revenue growth over the last five years indicates it’s winning market share
2. Free cash flow margin is expected to increase by 11.3 percentage points next year, suggesting the company will have more capital to invest or return to shareholders
3. Historical investments are beginning to pay off as its returns on capital are growing

Royal Caribbean’s stock price of $254.80 implies a valuation ratio of 14.7x forward P/E. Is now the right time to buy? See for yourself in our full research report, it’s free for active Edge members.

Stocks We Like Even More

Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.

Take advantage of the rebound by checking out 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 183% over the last five years (as of March 31st 2025).

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-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today

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