4 Consumer Discretionary Stocks to Buy as Inflation Cools
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With inflation cooling to its lowest level in more than three years, the U.S. economy is signaling a shift toward stability. August saw inflation rise by just 2.5% year over year, down from 2.9% in July. This steady decline, coupled with the expectation of an interest rate cut from the Federal Reserve, is setting the stage for improved consumer confidence. For investors, this marks an opportune moment to consider sectors poised to benefit from these positive trends.
One of the beneficiaries of this cooling inflationary environment is the Consumer Discretionary sector. Whether it’s spending on apparel, electronics or home improvements, the demand for discretionary products typically rises when inflation is under control. These trends are paving the way for a rebound in consumer spending, creating favorable conditions for companies such as G-III Apparel Group, Ltd. GIII, Victoria's Secret & Co. VSCO, Wolverine World Wide, Inc. WWW and Crocs, Inc. CROX.
Reduced inflationary pressures lower the costs of raw materials and production for companies. This means that businesses can either pass on savings to customers through lower prices, stimulating demand, or improving their profit margins. The dual benefit of lower input costs and increased consumer spending could lead to stronger earnings growth in the coming quarters, making this a promising sector for investors.
Another factor supporting consumer discretionary stocks is the anticipated interest rate cut by the Federal Reserve in the upcoming meeting as inflation eases. Consumers may be more inclined to finance big-ticket purchases as borrowing costs decrease. At the same time, companies within this sector can benefit from lower borrowing costs for expansion, increasing their ability to invest in new products or markets.
Below, we have highlighted four companies in this sector that are well-positioned to capitalize on the combination of cooling inflation and a more accommodative monetary environment.
Past-Year Stock Price Performance for Our Picks
Image Source: Zacks Investment Research
4 Strong Consumer Discretionary Stocks
G-III Apparel Capitalizes on Strategic Brand Expansions
G-III Apparel Group stands out as a strong investment prospect, driven by its strategic global expansion and brand portfolio enhancement. The company’s licensing agreements, such as the highly anticipated Converse apparel launch in Fall 2025, along with partnerships with leading brands like Halston, Nautica and Champion Outwear, are poised to unlock new revenue streams. G-III’s increased stake in All We Wear Group will boost its European presence, with expected sales growth exceeding $200 million in the next three to five years. The robust performance of its owned brands, Donna Karan, DKNY and Karl Lagerfeld, continues to drive market share gains, further solidifying the company’s promising outlook.
The Zacks Consensus Estimate for G-III Apparel’s current and next financial-year earnings per share has increased by 10.5% and 10.2% to $4.01 and $4.11, respectively, over the past seven days. This Zacks Rank #1 (Strong Buy) company has a trailing four-quarter earnings surprise of 118.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.