Top Consumer Discretionary Stocks for June 2023

LNW, RIVN, and MNSO lead peers for value, growth, and momentum, respectively

Close-up of logo for electric vehicle company Rivian on a vehicle.

Gado / Getty Images

Top stocks in the consumer discretionary sector for June 2023 include MINISO Group Holding Ltd., Carrols Restaurant Group Inc., and Wingstop Inc., which have soared by as much as 225% in the last year, significantly outpacing the broader market.

Consumer discretionary stocks as a group, as represented by the Consumer Discretionary Select Sector SPDR Fund (XLY), have risen about 5% over the last year. The Russell 1000 Index, a broad measure of U.S. large-cap stocks, has climbed 3% during the same period.

Below are the top consumer discretionary stocks for this month, classified by best value, fastest growth, and most momentum. Benchmark data above are as of June 8, while all figures below are as of June 5, 2023.

Best Value Consumer Discretionary Stocks

These are the consumer discretionary stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows that you're paying less for each dollar of profit generated. But they also could turn out to be a classic case of a value trap.

Best Value Consumer Discretionary Stocks
  Price ($) Market Capitalization (Market Cap) ($B) 12-Month Trailing P/E Ratio
Light & Wonder Inc (LNW) 62.29 5.7 1.6
Designer Brands Inc. (DBI) 6.43  0.4 2.8
Stellantis NV (STLA) 15.75 49.5 2.9

Source: YCharts

  • Light & Wonder Inc.: Light & Wonder, formerly known as Scientific Games Corporation, designs gaming content for casinos and related businesses. The company recently repaid $4.8 billion in debt, reducing its outstanding debt by 55%. Quarterly earnings have shrunk significantly since the company's divestiture of its sports betting and lottery business in the second and third quarters of 2022.
  • Designer Brands Inc.: Designer Brands manufactures and retails footwear and related accessories. It operates the Designer Shoe Warehouse (DSW) chain of stores. Net sales decreased by about 11% year-over-year in the first quarter of the year as consumers reined in discretionary spending. However, the company said it is making progress on its goal of doubling sales of its exclusive brands between 2021 and 2026.
  • Stellantis NV: Stellantis is a Dutch automotive manufacturer formed by the 2021 merger of Fiat Chrysler and Peugeot. The company's brands include Jeep, Dodge, Chrysler, Fiat, Alfa Romeo, and Citroën. Revenue climbed by 14% for the first quarter of 2023 on higher shipments and favorable net pricing.

Fastest-Growing Consumer Discretionary Stocks

These are the top consumer discretionary stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly year-over-year (YOY) percentage revenue growth and most recent quarterly YOY earnings-per-share (EPS) growth.

Both sales and earnings are critical factors in the success of a company. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one figure or the other unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of more than 1,000% were excluded as outliers.

Fastest-Growing Consumer Discretionary Stocks
  Price ($) Market Cap ($B) EPS Growth (%) Revenue Growth (%)
Rivian Automotive Inc. (RIVN) 14.34 13.5 N/A (see company description) 595.8
NeoGames SA (NGMS) 27.36 0.9 N/A (see company description) 273.8
Norwegian Cruise Line Holdings Ltd. (NCLH) 16.18 6.9 N/A (see company description) 249.1

Source: YCharts

  • Rivian Automotive Inc.: Rivian is an electric vehicle manufacturer that produces SUVs, trucks, and delivery vans. The company said in May that it is on track to produce 50,000 vehicles in 2023, double its volume from 2022. Note that Rivian Automotive doesn't have an EPS growth figure in the table above because the company reported a loss per share in the most recent quarter.
  • NeoGames SA: NeoGames is an Israeli technology company that provides iLottery and iGaming solutions and services for lottery and gaming operators worldwide. The company's merger with Aspire Global contributed to revenue growth in the first quarter of the year, but it maintained strong growth in its core lottery business, regardless. NeoGames doesn't have an EPS growth figure above because it reported a net loss in the latest quarter. Notably, NeoGames also announced in mid-May that it would be acquired by Aristocrat Leisure Limited for $1.2 billion.
  • Norwegian Cruise Line Holdings Ltd.: Norwegian is a cruise company offering international itinerary packages. Norwegian's revenue has rebounded from pandemic lows as pent-up demand has increased occupancy and prices. Growth in the first quarter was partially hindered by higher fuel and foreign exchange costs. Note Norwegian Cruise Line doesn't have an EPS growth figure in the table above because the company reported a net loss per share in the most recent quarter.

Consumer Discretionary Stocks With the Most Momentum

These are the consumer discretionary stocks that had the highest total return over the past 12 months.

Consumer Discretionary Stocks With the Most Momentum
  Price ($) Market Cap ($B) 12-Month Trailing Total Return (%)
MINISO Group Holding Ltd. (MNSO)   16.38 5.2 224.6
Carrols Restaurant Group Inc. (TAST) 5.71 0.3 199.0
Wingstop Inc. (WING) 203.69 6.1 162.1
Russell 1000 Index N/A N/A 3.4
Consumer Discretionary Select Sector SPDR ETF (XLY) N/A N/A 4.5

Source: YCharts

  • MINISO Group Holding Ltd.: MINISO is a Chinese global household goods store. It specializes in low-cost products targeted to a younger demographic. MINISO increased its total store count by more than 400 in the last year, helping to contribute to 26% revenue growth for the first quarter of 2023.
  • Carrols Restaurant Group Inc.: Carrols is a restaurant franchisee company. It owns and operates more than 1,000 Burger King restaurant locations, as well as several dozen Popeyes restaurant locations. Total restaurant sales increased almost 12% year-over-year for the first three months of 2023, driven by strong growth at both Burger King and Popeyes locations.
  • Wingstop Inc.: Wingstop operates an international chain of chicken wing restaurants. It also offers franchising opportunities. The company opened 37 new locations in the first three months of 2023. It reported a 20% increase in domestic same-store sales and a 30% increase in system-wide sales for the period.

Advantages of Consumer Discretionary Stocks

Growing Economy: Consumer discretionary stocks capitalize on a healthy economy. Consumers with higher discretionary income are more likely to purchase "wants," such as new designer clothes, the latest electronic gadgets, or a long-awaited family vacation. Generally, the group performs well when consumer confidence is high and shoppers feel secure about their employment situation and financial position. Investors can track consumer sentiment by following the Consumer Confidence Index (CCI)—a survey administered by The Conference Board that measures how optimistic or pessimistic consumers are regarding their expected financial situation.

Brand: Many consumer discretionary stocks benefit from strong brand recognition, helping drive revenue and create market share. Moreover, companies that build brand loyalty can enter new product areas, or even new industries, taking their existing customers with them. For example, Amazon.com, Inc. (AMZN) started as an online marketplace for books, but through increased brand awareness, it grew into an e-commerce giant and is now a global conglomerate involved in everything from digital streaming to logistics.

Risks of Consumer Discretionary Stocks

Slowing Economy: Just as consumer discretionary stocks perform well during periods of economic expansion, they struggle in downturns and recessions when consumers rein in their spending on discretionary products and services.

Supply Chain Disruptions: Consumer discretionary companies face challenges from snarls in supply chains. For instance, during the COVID-19 pandemic, many companies in the sector faced months of disruptions from border closures, shipping delays, and cargo backlogs. These issues can increase costs. Companies can try to pass those expenses on to consumers, but there's no guarantee they'll accept price increases.

Inflation: Rising prices can deter potential customers from purchasing discretionary items, particularly if consumer confidence starts to fall. Many economists have forecast a recession for the U.S. economy in 2023 after inflation hit a 40-year high in June 2022. Additionally, price hikes in other areas of the economy can have a contagion effect on consumer discretionary stocks. For example, a rise in airline tickets due to higher fuel costs can weaken demand for hotels.

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As of the date this article was written, the author does not own any of the above stocks.

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