Despite recent economic indicators like GDP and consumer sentiment suggesting resilience in the U.S. economy, that doesn’t mean all consumer stocks are booming right now. In fact, there are plenty that are best described as doomed consumer stocks.
For some of these names, macro-related challenges are negatively affecting their operating performance, leading to big price declines, and the risk of further price declines. The economic picture is not quite as rosy in other parts of the world.
Even in the U.S., while inflation may cool, high interest rates are still serving as a negative for certain industries.
For other consumer stocks doomed rather than booming, company-specific challenges are a major threat to their future performance. Think challenges like changing consumer trends, catalysts that have not quite panned out, and other such factors.
With this, consider it best to avoid at a cost doomed consumer stocks, including these seven.
Beyond Meat (BYND)
Before and right just after the pandemic, Beyond Meat (NASDAQ:BYND) was arguably one of the hottest consumer stocks out there. Investors were willing to pay up for shares in this purveyor of plant-based meat alternatives, on the view that changing dietary habits would lead to continued high growth.
Flash forward to now. Since peaking at $464.7 million in 2021, Beyond’s revenues has been declining. The company’s 2023 estimated revenue ($336.4 million) is 27.6% below this figure. Meanwhile, high net losses have persisted. With this, it’s no surprise that BYND stock has fallen from triple-digit to single-digit prices.
Yet even at just over $6 per share, BYND is far from a bargain. While revenue should increase slightly, high losses are expected to continue. With “plant-based meat” proving to be a fad rather than a shift in how the world consumes protein, stay away.
Canada Goose Holdings (GOOS)
Canada Goose Holdings (NYSE:GOOS) is another of the doomed consumer stocks that during the late 2010s/early 2020s could be considered one of the hot consumer stocks. In the case of this apparel company, most famous for its pricey winter coats, sales have kept on climbing.
However, since 2022, softening demand in China, a key market for Canada Goose has led to growth deceleration. Inflation has also put the squeeze on margins. Although GOOS stock recently experienced a double-digit rally, following a positively received quarterly earnings release, a continued comeback hinges heavily on a further comeback in Chinese demand.
This may be easier said-than-done. While Canada Goose’s sales in Asia rose 62% last quarter, this boost could prove temporary. Weakening demand in North America and Europe may again counter this growth. As today’s cautious optimism could give way to another wave of doom and gloom, avoid GOOS.
Penn Entertainment (PENN)
Casino and online gambling operator Penn Entertainment (NASDAQ:PENN) is yet another of the consumer stocks once too hot to touch, but now not so much. As you may recall, there was a lot of hype surrounding Penn’s launch of Barstool Sportsbook in 2020.
Due to the popularity of the Barstool brand, speculators bid up PENN stock “to the moon,” on the expectation that this platform would gain high market share. Unfortunately, this gambit failed to pay off. Competitors DraftKings (NASDAQ:DKNG) continued to dominate the market.
Penn has since rebranded its online sport sbook as ESPN Bet. While off to a seemingly strong start, much of Penn’s increased online sports book volume has been because of generous promotional offers. All bets are off whether these new users will stick around. Until then, err on the side of caution, and assume PENN (down 84% from its all-time high) remains in a slump.
Planet Fitness (PLNT)
Since last fall, I’ve considered Planet Fitness (NYSE:PLNT) one of the doomed consumer stocks. Mostly, because of macro factors like high inflation and interest rates that threaten future franchisee growth.
Without this growth, it will be difficult for shares in this fitness center franchising company to sustain a premium valuation (31.2 times forward earnings).
Admittedly, the market has thought otherwise, since I initially laid out the bear case for PLNT stock. Shares have bounced back in recent months, most likely due to the expectation of lower interest rates in 2024. Strong guidance issued in November has also been a positive for shares.
But while rate cuts are on the horizon, recent remarks from Federal Reserve Chairman Jerome Powell suggest the Fed won’t be going “full steam ahead,” and will be cautious in its lowering of rates. This could affect PLNT’s future growth, causing disappointment down the road.
VinFast Auto (VFS)
For a split second last year, Vietnamese electric vehicle maker VinFast Auto (NASDAQ:VFS) was one of the hottest stocks out there.
However, soon after this, VFS stock plunged sharply. By the fall, shares were trading at levels well below the aforementioned SPAC price. Weak sentiment for EV stocks, coupled with an increased focus on fundamentals, have kept VinFast shares at rock-bottom prices.
If you believe this makes VFS an opportunity to scoop up a growth stock on the cheap, think otherwise. With delivery growth falling short of expectations, and as the company covers high cash burn with capital raised through the dilutive sale of new shares, this onetime hot stock may keep spiraling down to lower prices.
Victoria’s Secret (VSCO)
Trading for only 12.5 times forward earnings, Victoria’s Secret (NYSE:VSCO) to some may appear undervalued. Yet rather than being a deep value opportunity, it may be best to consider shares in the women’s apparel retailer a value trap, and one of the doomed consumer stocks.
Yes, VSCO stock has nearly doubled from its 52-week low, on growing investor confidence in the company’s turnaround. However, it’s still unclear whether a turnaround is truly taking shape. For Q3 2023, Victoria’s Secret reported declining sales, contracting margins, with its bottom line swinging from a profit to a loss.
Although VSCO could positively surprise the market after its upcoming earnings day (Feb. 29), sell-side earnings forecasts for 2024 and beyond suggest analysts remain downbeat about the company’s turnaround chances. All of this helps to explain why VSCO stock has a moderately high level of short interest (14.15% of outstanding float).
Shares in online home furnishings retailer Wayfair (NYSE:W) zoomed higher during the pandemic era, but in more recent years have slid back to below pre-Covid price levels.
The boom times of the “stay at home economy” have long since passed.
Wayfair has also reported heavy losses, because of both declining sales and the squeeze of high inflation. Last summer and fall, W stock attempted to bounce back, yet promptly fell back, as strong results gave way to weaker-than-expected results and a declining customer base. In December, takeover rumors gave W shares a short-lived boost.
This zig-zag pattern may continue. With this stock’s high short interest (22.46% of float), speculators could use any positive news to drive a short-lived squeeze. However, until Wayfair’s finally experiences a rebound in sales and profitability, expect future rounds of hope and hype to be crushed again and again by poor fiscal results.
On the date of publication, Thomas Niel 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.