Chicago, IL – February 19, 2025 – Today, Zacks Equity Research discusses Interparfums, Inc. IPAR, Central Garden & Pet Co. CENT, The RealReal, Inc. REAL and The Honest Company, Inc. HNST.
Industry: Consumer Discretionary
Link: https://www.zacks.com/commentary/2417438/4-consumer-discretionary-stocks-poised-for-growth-in-2025
The Consumer Products-Discretionary industry remains dynamic, characterized by evolving consumer preferences, economic conditions and ongoing innovation. As inflationary pressures ease and labor markets remain resilient, consumer spending in discretionary categories is expected to stay robust.
Furthermore, technological advancements, particularly in e-commerce and artificial intelligence, are enhancing consumer experiences and expanding market reach. Meanwhile, the Federal Reserve's strategic approach to rate cuts should allow consumers to manage their budgets better and sustain discretionary purchases.
While challenges persist, companies that leverage digital transformation, embrace sustainability and focus on delivering unique customer experiences are well-positioned to thrive in this burgeoning sector. Interparfums, Inc., Central Garden & Pet Co., The RealReal, Inc. and The Honest Company, Inc. are well-placed to seize opportunities that may arise in this changed marketplace.
The Consumer Products-Discretionary industry has a direct correlation with the economy, making it cyclical. Discretionary products command high prices, with middle-to-higher-income groups being targeted customers. The industry comprises companies that offer product categories, including fashion, jewelry and watches, and other home and art products.
Quite a few players develop, manufacture, market and sell over-the-counter health and personal care products. Some even manufacture and distribute party goods. There are companies that design, source and distribute licensed pop culture products, too. Some industry participants also produce and distribute various products for the lawn and garden, and pet supplies markets. Companies sell products to specialty retailers, mass-market retailers and e-commerce sites.
Consumers’ Willingness to Spend: The performance of the consumer discretionary industry is closely tied to consumers’ purchasing power. Despite a challenging economic environment, consumer spending — an essential driver of the economy — has shown resilience due to decent hiring and wage growth. In January, the U.S. economy added 143,000 jobs, contributing to this positive trend, according to the Bureau of Labor Statistics. Average hourly earnings increased 4.1% compared to the same period last year. Meanwhile, the unemployment rate decreased to 4% from 4.1%.
Brand Enhancement, Capital Discipline: Industry participants have been focusing on deepening engagements with consumers, creating innovative and compelling products and enhancing digital and data analytics capabilities. The launch of newer styles, customization options, unique packaging, point-of-sale displays, automation and high-end customer service enables them to woo consumers.
Efforts to enhance the brand portfolio via marketing strategies, buyouts, innovations and alliances are likely to keep supporting players in the space. The companies have been taking steps to strengthen their financial position. They have been making every move, from managing the inventory to optimizing capital expenditures and enhancing operational efficiency.
Margins, an Area to Watch: The industry is quite fragmented, with companies vying for a bigger slice of the pie on attributes such as price, products and speed to market. To address these, a significant number of players in the industry have been investing in strengthening their digital ecosystem.
While these endeavors provide an edge, they entail high costs. Apart from these, higher marketing, advertising and other operational expenses might compress margins. Of late, the industry participants have been dealing with product cost inflation. Nonetheless, companies have been focusing on undertaking initiatives to mitigate cost-related challenges. These include streamlining operational structures, optimizing supply networks and adopting effective pricing policies.
The Zacks Consumer Products-Discretionary industry is a group within the broader Consumer Discretionary sector. The industry currently carries a Zacks Industry Rank #83, which places it in the top 33% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates encouraging near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. The industry’s position in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate.
Looking at the aggregate earnings estimate revisions, it appears that analysts are gaining confidence in this group’s earnings growth potential. Since the beginning of 2025, the industry’s earnings estimate has risen roughly by 2%.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
The Zacks Consumer Products-Discretionary industry has underperformed the broader Zacks Consumer Discretionary sector and the Zacks S&P 500 composite over the past year.
The industry has jumped 15.3% over this period compared with the S&P 500’s rise of 23.2%. Meanwhile, the broader sector has increased 18%.
On the basis of forward 12-month price-to-sales (P/S), which is commonly used for valuing consumer discretionary stocks, the industry is currently trading at 3.26X compared with the S&P 500’s 5.37X and the sector’s 2.26X.
Over the last three years, the industry has traded as high as 3.38X and as low as 2.17X, with the median being at 2.74X.
Central Garden & Pet Company: The company is positioning itself as a frontrunner in the U.S. pet supplies and lawn and garden supplies industry, bolstering its competitive edge through a range of strategic endeavors. These include unique packaging, impactful point-of-sale displays, logistics capabilities and a steadfast commitment to delivering exceptional customer service. Central Garden & Pet Company is focusing on brand building, containing costs, lowering complexity and improving margins. The company has been expanding its manufacturing capacity and simplifying its portfolio.
The Zacks Consensus Estimate for Central Garden & Pet Company’s current financial-year sales and earnings suggests growth of 1% and 8.4% from the year-ago period. CENT delivered a trailing four-quarter earnings surprise of 208.7%, on average. Shares of this Zacks Rank #1 (Strong Buy) company have declined 9.9% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Honest Company: The Honest Company’s strong performance reflects its ability to drive sustainable growth through strategic initiatives. Robust consumer demand, supported by category strength and retail expansion, has positioned the company ahead of broader market trends. Margin expansion, fueled by supply-chain efficiencies and cost optimization, has enhanced profitability. Consistent gains in retail and e-commerce channels highlight growing brand recognition and customer loyalty. Moreover, disciplined marketing investments have strengthened consumer engagement, while a solid balance sheet with no debt provides the flexibility to reinvest in future growth opportunities.
This manufacturer and seller of diapers and wipes, skin and personal care, and household and wellness products delivered a trailing four-quarter earnings surprise of 80%, on average. The Zacks Consensus Estimate for The Honest Company’s current financial-year sales and earnings suggests growth of 8.9% and 82.9% from the year-ago period. Shares of this Zacks Rank #1 company have surged 95.3% in the past year.
The RealReal: REAL recently reported strong preliminary financial results for the fourth quarter of fiscal 2024 while completing a strategic debt exchange to strengthen its financial position. The company, which operates as the largest online marketplace for authenticated resale luxury goods, announced that its Gross Merchandise Value (“GMV”) and adjusted EBITDA for the fourth quarter exceeded the previous guidance. In the quarter, GMV reached $503.5 million, surpassing the prior guided range of $484 million-$500 million. Adjusted EBITDA for the quarter is expected between $10.7 million and $11.2 million, exceeding the prior range of $6.5 million-$9.5 million.
The Zacks Consensus Estimate for REAL’s current financial-year sales and earnings suggests growth of 9.1% and 12.6% from the year-ago period. REAL has a trailing four-quarter earnings surprise of 30.3%, on average. Shares of this Zacks Rank #2 (Buy) company have advanced 339% in the past year.
Interparfums: Interparfums’ growth strategy is driven by strong brand positioning, expanding market reach and disciplined execution. The company’s diversified global presence reduces risk and enhances long-term stability while its premium brand portfolio continues to attract consumer demand. Effective distribution strategies, including direct-to-retail expansion and digital advancements, support sustained revenue momentum. Moreover, disciplined cost management and operational efficiencies reinforce profitability, allowing for reinvestment in brand-building initiatives.
This leading global fragrance company registered positive earnings surprises in the last two reported quarters. The Zacks Consensus Estimate for Interparfums’ current financial-year sales and earnings suggests growth of 10.3% and 8.2% from the year-ago period. Shares of this Zacks Rank #3 (Hold) company have declined 30.1% in the past year.
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Central Garden & Pet Company (CENT) : Free Stock Analysis Report
Interparfums, Inc. (IPAR) : Free Stock Analysis Report
The RealReal, Inc. (REAL) : Free Stock Analysis Report
The Honest Company, Inc. (HNST) : Free Stock Analysis Report
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