Consumer discretionary stocks largely rely on the whim of the consumer. After all, the name of the segment says it all. These stocks are attached to companies that sell products that consumers really don’t need. They have to want to make a purchase.
These stocks include automotive, retail, entertainment and hospitality companies. They do well when the economy is doing well, or when the company has an innovative enough product that it encourages consumers to buy.
Largely, consumer discretionary stocks rely on consumers to have plenty of disposable income to make those types of luxury or impulse buys. But when the economy is questionable or inflation is high, or when interest rates make borrowing more expensive, consumer discretionary stocks are among the first to falter.
The economy this year has been better than anyone predicted it would be. But there are economy-related headwinds that are pushing some consumer discretionary stocks into “F” ratings. And there are some industry-specific problems that also factor in.
If you own any of these F-rated consumer discretionary stocks, it’s time to rethink your portfolio.
Mullen Automotive (MULN)
I know I’ve said this before, but it bears repeating. Mullen Automotive (NASDAQ:MULN) is an awful automotive stock.
The company has aspirations to be the newest, hottest electric vehicle company with plans to sell crossovers, sports cars, pickups and commercial vehicles. But nobody’s buying. Or at least, not enough people are buying to make the investment worthwhile.
Mullen split its stock twice so far this year to prop up the sagging share price to more than $1 just to stay in compliance with Nasdaq rules, but even that didn’t work. Just a month after the most recent reverse split, the stock price is back below a buck and Nasdaq sent Mullen a delisting notice.
Mullen is fighting the effort and asked for a hearing, but the delisting seems inevitable. MULN gets a well-deserved “F” rating from the Portfolio Grader.
Walt Disney Co. (DIS)
If you want a company that’s the polar opposite of Mullen, you could make an argument for Walt Disney Co. (NYSE:DIS).
One of America’s most iconic brands, Disney made a fortune from its movie franchises, theme parks, cruises, hospitality experiences and from streaming and television networks.
But that history hasn’t kept it from hitting bottom lately.
Disney stock is down 24% since February and is approaching 52-week lows. The company’s coming off a fiscal Q3 2023 earnings report that saw a net loss of $460 million, or 25 cents per share. That’s down from a year-ago profit of $1.41 billion.
The Disney+ streaming service hasn’t taken hold as investors had hoped. The subscriber count of 146.1 million as of July 1 was down 7.4% from June.
Disney’s former CEO, Bob Iger, returned a few months ago to try to right the Disney ship, but now the entertainment division is looking at a writer’s strike that essentially shut down Hollywood.
With no new series or movies in the works in the near future, and with bloated ESPN continuing to contract, the immediate future looks bleak for the House of Mouse.
DIS stock has an “F” rating in the Portfolio Grader.
Plug Power (PLUG)
A few years ago, Plug Power (NASDAQ:PLUG) seemed like a can’t-miss prospect. The idea of a zero-emission energy source like hydrogen fuel cells seemed to be the perfect solution for a globe grappling with global warming.
But it’s not to be. Plug Power still hasn’t figured out a way to make the technology profitable, which is why it had a gross margin of -28% last year.
Q2 earnings brought in revenue of only $260.18 million. But the company spent almost twice that, with a net loss of $236.4 million for the quarter.
Less than three years ago, PLUG stock was flying high at $65 per share. Now it’s less than $10 and is down 33% just in 2023. PLUG stock has an “F” rating in the Portfolio Grader.
Dish Network (DISH)
You know a company’s in trouble when its name alone tells you how irrelevant and out of touch it is. Maybe that sounds a little harsh, but the concept of little satellite dishes to watch TV seems to be a very 20th-century concept in an era where 5G internet is everywhere.
Dish Network (NASDAQ:DISH) seems self-aware enough that it’s branched out into streaming television as well by owning Sling TV. But Sling is losing subscribers quicker than it can get them, with its headcount down 97,000 in the second quarter.
Its total user base of about 2 million is its lowest in five years. That’s not a good trend.
Overall, Dish’s Q2 saw revenue of $3.91 billion, down from $4.21 billion a year ago. Income of $200 million and 31 cents per share was down from $523 million and 81 cents per share in Q2 2022.
Dish also owns Boost Mobile, but that’s not a good business, either. The wireless provider saw subscriptions drop by 188,000 in the second quarter, leaving Boost with 7.73 million subscribers.
DISH stock is down 55% this year and has an “F” rating in the Portfolio Grader.
Farfetch (FTCH)
Farfetch (NASDAQ:FTCH) is an e-commerce platform that caters to the luxury fashion industry.
It now claims to carry brands from more than 50 countries and 1,400 suppliers.
But if you’ve not heard of this brand before, you’re not the first. There are massive e-commerce brands that dwarf tiny Farfetch, which has a market capitalization of just $920 million and a debt load of $1.15 billion.
And Farfetch continues to lose money each quarter. Year-over-year revenue growth is only 1%, but the company has a comparatively steep profit margin of -37%.
The trend continued in the second quarter, where Farfetch reported revenue of $572.09 million, less than analysts’ expectations of $650.71 million. The EPS loss was 21 cents.
FTCH stock is down 50% this year and has an “F” rating in the Portfolio Grader.
Jerash Holdings (JRSH)
Jerash Holdings (NASDAQ:JRSH) makes a lot of the clothes that you probably own or see around town.
The company creates clothing for 19 global brands, including Timberland, North Face, New Balance, Tommy Hilfiger, Calvin Klein and more.
Production facilities and the workforce are in Amman, Jordan and Hong Kong, where the company produces 45,000 pieces of clothing per day.
But the demand for clothing dropped significantly in recent quarters. CEO Sam Choi calls it a “challenging retail environment” that affects profitability as consumers shifted to lower-margin items.
Revenue for the company’s fiscal Q1 2024, ending June 30, 2023, was $34.7 million, up from $33.4 million in the same quarter a year ago. Profits dropped to $5.6 million from $6.6 million a year ago.
Income of $495,000 came in at 4 cents per share, down from $17 million and 14 cents per share in the same period a year ago.
JHSH stock has an “F” rating in the Portfolio Grader.
Workhorse (WKHS)
I can’t stop thinking that Workhorse (NASDAQ:WKHS) got the fuzzy end of the lollypop when it lost out on the U.S. Postal Service deal in 2021.
The company (and many investors) thought it was in perfect shape to win a lucrative contract to supply the next-generation mail truck.
Instead, the work shockingly went to defense contractor Oshkosh (NYSE:OSK). And Workforce has never been the same.
The company still has dreams of making electric commercial vehicles and catering to the last-mile delivery market. But it operates on a much smaller scale than it expected to. It got only 62 orders in Q2 and delivered 42 vehicles.
At management’s urging, shareholders voted this month to increase the company’s share count to add equity and fund expansion efforts. While that dilutes the value of current shares, Workhorse is gambling that it could pay off in the long run.
But for now, the company’s prospects and the diluted share value pushed the stock price below $1 per share. WKHS may need to look at a stock split or other financial tricks at some point to get the share price back over Nasdaq compliance rules.
WKHS stock has an “F” rating in the Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
