Stock Market Crash Warning: Don’t Get Caught Holding These 3 Consumer Stocks.

Stocks to sell

The U.S. economy is slowing, which is bad news for consumer stocks. In recent days, economic data showed that gross domestic product (GDP) in America grew at an annualized rate of 1.6% in the year’s first quarter, considerably slower than the preceding quarter’s 3.4% growth. At the same time, the personal consumption expenditures (PCE) price index, the U.S. Federal Reserve’s preferred inflation gauge, rose to a 3.4% annualized rate in Q1, up from 1.8% in the fourth quarter of 2023.

Slowing U.S. growth and rising inflation has markets worried about stagflation, which occurs when inflation continues to rise even though the economy slows. Fears of stagflation have roiled the stock market in recent days, as have diminished expectations that the Fed will lower interest rates this year. A majority of futures traders now predict no rate cuts in 2024. It all adds up to continued market volatility for investors which is why they should pay attention to this list of consumer stocks to avoid.

WW International (WW)

Down 80% over the last year, WW International (NASDAQ:WW), the company behind Weight Watchers, has already crashed. Investors should be cautious about buying the dip in WW stock. The company’s share price is now below $2 because its once popular diet and weight loss program has been usurped by obesity drugs such as Ozempic and Zepbound. Even former Weight Watchers spokesperson Oprah Winfrey has severed ties with the company as she herself switches to using prescription medication for weight loss.

WW stock is trading in penny stock territory, defined as any security that trades for less than $5. The sharp decline comes as consumers flock to new blockbuster weight loss drugs such as Novo Nordisk’s (NYSE:NVO) Ozempic and Eli Lilly’s (NYSE:LLY) Zepbound. Analysts are raising questions about WW International’s ability to remain in business, noting that the company has $1.5 billion of debt.

Last year, Weight Watchers long-time rival Jenny Craig filed for bankruptcy, citing the impact of weight loss drugs. At this time, investors should consider companies that sell weight loss programs and diet plans consumer stocks to avoid. Instead, focus on pharmaceutical companies that are helping people lose weight through medication.

Walgreens Boots Alliance (WBA)

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It’s still not a good time to take a position in retail pharmacy chain Walgreens Boots Alliance (NASDAQ:WBA). Over the last 12 months, WBA stock has fallen 50%, including a 35% decline so far this year. The company’s share price today is 68% lower than where it was five years ago. The situation has gotten so bad with Walgreens that the stock was removed from the blue-chip Dow Jones Industrial Average earlier this year. The company’s most recent earnings report, where it lowered its profit outlook, hasn’t helped.

To be fair, Walgreens did report fourth-quarter 2023 revenue that beat Wall Street forecasts. However, the company lowered its 2024 profit guidance to $3.20 to $3.35 per share, down from a previous outlook that called for $3.20 to $3.50 in per share earnings. Analysts had expected full-year earnings of $3.24 a share from Walgreens. Management said the reduced guidance reflects an uncertain economic environment and challenging retail sector. The company declined to give a revenue forecast for the year.

Lululemon Athletica (LULU)

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It’s not even summer yet, but 2024 has already proven to be a challenging year for Lululemon Athletica (NASDAQ:LULU). Slowing sales in North America are largely responsible for LULU stock falling 30% since January. The athletic apparel company has responded to the slowdown by announcing that it is closing a distribution center in Washington state and eliminating 128 jobs. The company said it decided to close the distribution center as it re-evaluates its global network.

LULU stock really began to tumble after the company reported disappointing Q4 2023 numbers and issued weak guidance. Lululemon reported that its Q4 sales rose 9% in North America compared to 29% growth a year earlier.

While Lululemon is still growing in the U.S. and Canada, its sales have slowed considerably. As for 2024 guidance, Lululemon said that it expects annual sales of $10.7 billion to $10.8 billion compared with analyst estimates of $10.9 billion. This makes LULU another one of the well known consumer stocks to avoid.

On the date of publication, Joel Baglole held a long position in LLY. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.

Read more: Penny Stocks – How to Profit Without Getting Scammed

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.

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