3 Consumer Stocks We're Skeptical Of

The performance of consumer discretionary businesses is closely linked to economic cycles. Over the past six months, it seems like demand may be facing some headwinds as the industry’s 7.5% return has lagged the S&P 500 by 2.6 percentage points.

A cautious approach is imperative when dabbling in these companies as many also lack recurring revenue characteristics and ride short-term fads. With that said, here are three consumer stocks that may face trouble.

Kontoor Brands (KTB)

Market Cap: $3.30 billion

Founded in 2019 after separating from VF Corporation, Kontoor Brands (NYSE:KTB) is a clothing company known for its high-quality denim products.

Why Should You Dump KTB?

1. 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
2. Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 13% for the last two years
3. Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions

At $59.43 per share, Kontoor Brands trades at 10.2x forward P/E. Read our free research report to see why you should think twice about including KTB in your portfolio.

Charter (CHTR)

Market Cap: $24.56 billion

Operating as Spectrum, Charter (NASDAQ:CHTR) is a leading telecommunications company offering cable television, high-speed internet, and voice services across the United States.

Why Is CHTR Risky?

1. Demand for its offerings was relatively low as its number of internet subscribers has underwhelmed
2. Forecasted free cash flow margin suggests the company will fail to improve its cash conversion over the next year
3. Improving returns on capital suggest management is identifying more profitable investments

Charter is trading at $190.25 per share, or 4.6x forward P/E. If you’re considering CHTR for your portfolio, see our FREE research report to learn more.

European Wax Center (EWCZ)

Market Cap: $176.5 million

Founded by two siblings, European Wax Center (NASDAQ:EWCZ) is a beauty and waxing salon chain specializing in professional wax services and skincare products.

Why Do We Steer Clear of EWCZ?

1. Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
2. Earnings per share lagged its peers over the last four years as they only grew by 4% annually
3. Underwhelming 11.8% return on capital reflects management’s difficulties in finding profitable growth opportunities

European Wax Center’s stock price of $4.04 implies a valuation ratio of 8.1x forward P/E. Dive into our free research report to see why there are better opportunities than EWCZ.

Stocks We Like More

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The names generating the next wave of massive growth are right here 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).

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