Most consumer discretionary businesses succeed or fail based on the broader economy. This sensitive demand profile can cause the industry to underperform when macro uncertainty enters the fray, and over the past six months, its 4.4% return has fallen short of the S&P 500’s 9.6% gain.
Investors should tread carefully as many companies in this space are also unpredictable because they lack recurring revenue business models. Taking that into account, here are three consumer stocks that may face trouble.
Columbia Sportswear (COLM)
Market Cap: $2.92 billion
Originally founded as a hat store in 1938, Columbia Sportswear (NASDAQ: COLM) is a manufacturer of outerwear, sportswear, and footwear designed for outdoor enthusiasts.
Why Should You Sell COLM?
- Constant currency growth was below our standards over the past two years, suggesting it might need to invest in product improvements to get back on track
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 9.7% for the last two years
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Columbia Sportswear’s stock price of $54.16 implies a valuation ratio of 19.2x forward P/E. Dive into our free research report to see why there are better opportunities than COLM.
Movado (MOV)
Market Cap: $506.7 million
With its watches displayed in 20 museums around the world, Movado (NYSE: MOV) is a watchmaking company with a portfolio of watch brands and accessories.
Why Is MOV Risky?
- Annual revenue growth of 4.7% over the last five years was below our standards for the consumer discretionary sector
- Poor free cash flow margin of 4.3% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Movado is trading at $22.90 per share, or 13.5x forward P/E. Check out our free in-depth research report to learn more about why MOV doesn’t pass our bar.
iHeartMedia (IHRT)
Market Cap: $448.4 million
Occasionally featuring celebrity hosts like Ryan Seacrest on its shows, iHeartMedia (NASDAQ: IHRT) is a leading multimedia company renowned for its extensive network of radio stations, digital platforms, and live events across the globe.
Why Do We Steer Clear of IHRT?
- Lackluster 4.9% annual revenue growth over the last five years indicates the company is losing ground to competitors
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
At $3.10 per share, iHeartMedia trades at 7.8x forward EV-to-EBITDA. To fully understand why you should be careful with IHRT, check out our full research report (it’s free).
Stocks We Like More
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
