It might be time to look for consumer discretionary stocks to sell. They have exhibited varying performance over the past several months. For example, the Vanguard Consumer Discretionary ETF, a $5.4 billion exchange-traded fund with some 312 different consumer discretionary names, has only risen just under 3% on a year-to-date basis. This is relatively flat compared to the Nasdaq, which has rallied nearly 19% in the same period, and the S&P 500, which has risen 14.5%.
Elevated interest rates and inflation that is still too high are the critical disincentives to consumer spending on non-essentials. Moreover, the U.S. Federal Reserve does not seem to be in a hurry to make interest rate cuts, at least until the end of the year. That implies there will still be pressure on consumers going forward.
The prevalence of tighter consumer budgets also means there are certain stocks in the consumer discretionary sector to avoid in July. Below are three consumer discretionary stocks to sell.
Etsy (ETSY)
Etsy (NASDAQ:ETSY) markets itself has a two-sided marketplace wherein buyers and sellers can connect with one another. The platform has typically drawn in special artisans and entrepreneurs, ultimately creating a vibrant seller community that offers a variety of products that consumers would otherwise not be able to buy at other shops. However, with consumers dealing with their current budget constraints, Etsy has had to inject capital into advertising and promotions in order to compete with larger retailers for budget-anxious consumers.
So far, Etsy is losing that battle. First-quarter earnings results for fiscal year 2024 reported financial figures below Wall Street’s estimates. The platform’s gross merchandise sales (GMS) metric, a dollar value of all the items sold on Etsy’s marketplaces, came in at $3 billion, under analysts’ projection of $3.12 billion. Quarterly revenue and earnings figures were also slightly below estimates.
ETSY’s earnings have plummeted 29.6% year-to-date, and deteriorating consumer conditions could make it even more challenging for the platform to grow earnings in the near term.
Apple (AAPL)
Though Apple (NASDAQ:AAPL) is a large technology company, its primary sources of revenue are consumer electronics products, such as iPhones, iPads, and MacBooks. The oversupply of electronics from the pandemic years, coupled with less enthusiasm for the next iPhone (or any other smartphone), has caused Apple’s revenue growth to stutter. According to Koyfin, at the end of 2023, revenue, in fact, declined 2.8% year-over-year from $394.3 billion in 2022 to $383.3 billion. Similarly, in the first quarter of fiscal year 2024, the iPhone maker reported a sales figure of $90.7 billion, a 4.3% year-over-year decline from the first quarter of 2023.
Apple’s woes have not stopped. Not only does it face even more competition in China due to Huawei’s resurgence, but even the new AI features, dubbed as “Apple Intelligence,” coming to iOS later in the year, are unlikely to get consumers to flock over and buy the next Apple product.
While AAPL has risen 12.8%, uncertainty around the company’s future innovations and sales growth could send the stock trending back downward.
Royal Caribbean Cruises (RCL)
Founded in 1968, Royal Caribbean Cruises (NYSE:RCL) operates as a global cruise company under the brands Royal Caribbean International, Celebrity Cruises, and Silversea Cruises brands. The global COVID-19 pandemic has taken a major toll on Royal Caribbean’s sales and earnings growth as well as outlook. In 2020, revenue collapsed 79.8% to just $2.2 billion, and the following year saw sales plunge even further to $1.5 billion. Thankfully, going into 2022 and 2023, the cruise services have more than recovered. In 2023, Royal Caribbean generated $13.9 billion, representing a 57% year-over-year increase from 2022 and set a record revenue figure for the company overall.
However, despite all the recent growth, brewing natural disasters could put that on pause. Hurricane Beryl, currently roaring through the Caribbean, has become the earliest category-five hurricane ever recorded in the Atlantic Ocean. This will definitely be bad news for RCL stock as different cruise trips will be impacted, and we’re just beginning hurricane season.
On the date of publication, Tyrik Torres did not hold (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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.