3 Consumer Stocks We Approach with Caution

August 12, 2025 at 09:57 AM EDT

CRMT Cover Image

Retailers are evolving to meet the expectations of modern, tech-savvy shoppers. Still, demand can be volatile as the industry is exposed to the ups and downs of consumer spending. This has stirred some uncertainty lately as retail stocks have tumbled by 2% over the past six months. This drawdown was discouraging since the S&P 500 returned 5.7%.

A cautious approach is imperative when dabbling in these companies as many will light cash on fire by opening new locations without the proper justifications. Taking that into account, here are three consumer stocks we’re swiping left on.

America's Car-Mart (CRMT)

Market Cap: $371.9 million

With a strong presence in the Southern and Central US, America’s Car-Mart (NASDAQ: CRMT) sells used cars to budget-conscious consumers.

Why Is CRMT Risky?

Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
Gross margin of 21.1% is below its competitors, leaving less money for marketing and promotions
Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders

America's Car-Mart’s stock price of $45.24 implies a valuation ratio of 11.6x forward P/E. Read our free research report to see why you should think twice about including CRMT in your portfolio.

GameStop (GME)

Market Cap: $10.02 billion

Drawing gaming fans with demo units set up with the latest releases, GameStop (NYSE: GME) sells new and used video games, consoles, and accessories, as well as pop culture merchandise.

Why Do We Pass on GME?

GameStop’s brick-and-mortar engine keeps stalling as gamers migrate to digital downloads, and management is closing more outlets after shuttering hundreds of stores last year
The share price remains an unpredictable meme-stock roller-coaster, and the purchase of thousands of Bitcoins have fueled huge swings
On the bright side, the company has a large cash pile that gives CEO Ryan Cohen room to buy more Bitcoin or fund its collectibles and trading-card push

GameStop is trading at $22.54 per share, or 44.8x forward P/E. If you’re considering GME for your portfolio, see our FREE research report to learn more.

Bath and Body Works (BBWI)

Market Cap: $5.92 billion

Spun off from L Brands in 2020, Bath & Body Works (NYSE: BBWI) is a personal care and home fragrance retailer where consumers can find specialty shower gels, scented candles for the home, and lotions.

Why Does BBWI Give Us Pause?

Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
Estimated sales growth of 2.1% for the next 12 months implies demand will slow from its six-year trend
Earnings per share lagged its peers over the last six years as they only grew by 8.6% annually

At $28.36 per share, Bath and Body Works trades at 7.7x forward P/E. Check out our free in-depth research report to learn more about why BBWI doesn’t pass our bar.

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3 Consumer Stocks We Approach with Caution

America's Car-Mart (CRMT)

GameStop (GME)

Bath and Body Works (BBWI)

Stocks We Like More

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