Murmurs of a potential hard economic landing are resurfacing after a marked downturn in U.S. GDP during the first-quarter (Q1). The U.S. economy slowed sharply in Q1, growing at just 1.6%, lagging significantly behind the 2.5% estimate. Moreover, a soft jobs report compounds those concerns further. Hence, it’s probably the right time to consider consumer discretionary stocks to sell.
Another trend we’ve seen recently is that consumers are opting for less expensive generic products over high-end brands. According to the latest data from Bank of America’s credit card transactions, lower-income individuals are spending at a much swifter pace compared to wealthier consumers. With the more affluent consumers tightening their purse strings, here are three consumer discretionary stocks to sell.
Consumer Discretionary Stocks to Sell: AMC Entertainment (AMC)
Embattled movie-theatre operator AMC Entertainment (NYSE:AMC) has been panned front, right, and center over the past few years. Apart from the random spikes in value, AMC stock has shed an eye-watering 96% of its value in the past five years. In the past six months alone, it’s down 69%. If that’s not scary, that’s down almost 100% from its all-time high of $339 in June 2021!
AMC has been a cash-burning machine over the years, with its free cash flow per share dropping 164% to a negative $2.65 from 2019 to 2023. Moreover, its massive debt load exceeding $9 billion comfortably dwarfs the $884 million in its cash till.
Debt is a huge problem for AMC, and it is set to weigh down its bottom line even more, as it looks to extend its debt maturities. The company is up against secular headwinds, where streaming continues to outpace traditional cinema attendance. In fact, according to a recent Bloomberg report, movie ticket sales in the U.S. and Canada continue to lag behind pre-Covid levels, negatively impacting a potential recovery of theater chains.
Lucid Motors (LCID)
High-end luxury EV maker Lucid Motors (NASDAQ:LCID) was once touted as an emerging giant in the niche. However, like many of its peers, Lucid has witnessed a steep decline in demand from its heydays in 2021. In fact, its stock is down roughly 96% from its all-time high price of $64.86 in February 2021.
Deliveries are still rising on a year-over-year (YOY) basis, but the real question remains whether it can mass-produce EVs at a profit. It’s losing upwards of $100,000 per car on a gross-margin basis, with its operational losses ballooning to $3 billion in 2023. It still aims to deliver 9,000 EVs this year, which may be seen as a positive. However, not long ago, the company stated it would have delivered 90,000 EVs by this point. Therefore, there’s not much to like about LCID stock at this point, especially with the EV market slump.
Designer Brands (DBI)
Designer Brands (NYSE:DBI) is a footwear and accessories retailer that’s been growing at a sluggish pace over the past several years. Sales growth over the past five years has averaged a measly 2.46%, with a negative 1.32% net income margin over the same period. It’s been out of favor with investors for a long time, shedding more than 70% in the past decade.
The firm has struggled to hold its own in the challenging retail landscape of intense competition and aggressive promotional activities. Moreover, reducing consumer spending has also greatly weighed down its top-and-bottom-line growth. In the past six quarters, it missed top-line estimates on four occasions.
It’s tough to see the company mounting a comeback, especially with the current economic backdrop. Its product offerings are categorized as non-essential and are arguably the first to be discarded from consumers’ budgets during economic declines. Moreover, its dividends are nothing to write home about, with zero years of dividend growth, and a 5-year dividend growth rate of a negative 28%.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.