Consumer discretionary goods re🌃present wants rather than needs. They are goods that people can do without should their financial circumstances necessitate it.

The demand for consumer discretionary goods is much more vulnerable to economic pressures than the demꦰand for consumer staples goods, which are products that consumers need.

This elastic demand means that the companies that supply consumer discretionary goods can see their sales drop suddenly in response to widespread decreases in consumers' incomes or increases in prices. Not surprisingly, their stocks' share prices usually follow on this pattern.

What Is the Consumer Discretionary Sector?

The consumer discretionary sector is comprised of businesses that 澳洲幸运5官方开奖结果体彩𒅌网:sell non-essential goods and services.

These are products that consumers can usually live without and don't necessarily need in their day-to-day lives. They can cut back on them or forego them altogether without any major consequences to their well-being.

Some commo๊n types of cons🍬umer discretionary items include:

• Fast food
• Specialty food
• Furniture and appliances
  
• Vacation and leisure activities
• Apparel
• Vehicles

Some of the companies that fall into the consumer discretionary sector include McDonald's (MCD), Starbucks (SBUX), La-Z-Boy (LZB), Whirlpool (WHR), Walt Disney (DIS), Carnival Corp. (CCL), Nike (NKE), and Tesla (TSLA).

Factors That Weigh on the Sector

澳洲幸运5官方开奖结果体彩网:Consumer confidence plays a central role in the consumer discretionary sector. The University of Michigan's 澳洲幸运5官方开奖结果体彩网:consumer sentiment index is an important gauge of U.S. consumer optimism related to the state of the U.S. economy.

Economists, businesses, investors, and others monitor the index to predict the spendiꦕng habits🧸 of consumers and the consequences for companies in the consumer discretionary sector.

Trends that affect consumer spending power, such 📖as higher or stagnant wages or widespread changes in the prices of essential goods, usually change the prospects for consumer discretionary companies.

Rising interest rates and cutbacks in consumer spending after 澳洲幸运5官方开奖结果体彩网:recessionary periods tend to negatively affect these companies.

Longer🅠-term trends, such as the continued shift toꦇ online shopping and the pursuit of healthier lifestyles, can create headwinds in the sector.

Here's an overview of some of the industries within the consumer discretionary sector.

Auto Components Industry

The auto components industry is highly competitive and consists of many companies, large and small. These companies supply the auto parts used in the manufacturing, repair, and maintenance of cars. The parts include airbags, transmission systems, car seats, electrical circuits, and exhaust s♉ystems.

The car manufacturing industry is cyclical, creating fluctuating demand for auto parts. That makes profitability in the sector highly volatile. There is added volatility in the industry due to fluctuating costs in the needed raw mat꧒erials, such as copper and steel.

One leader in this sector is Magna International (MGA). Headquartered in Aurora, Ontario, Canada, the company designs and manufactures automotive parts and supplies. It builds entire vehicles and has separate divisions to build various vehicle parts, including exterior, interior, and under-the-hood components.

Automobile Industry

The automobile industry designs, produces, and markets cars, SUVs, trucks, buses, and other types of vehicles for private, public, and commercial use. The industry is one of the most 澳洲幸运5官方开奖结果体彩网:capital-intensive, as it requires billions of dollars to build plants and acquire the technology and th🦩e expertise that are needed for production.

Because demand is highly sensitive to economic cycles, the automobile industry's profitability margins can show high degrees of volatility. Many of its expenses remain fixed throughout the business cycle.

The 澳洲幸运5官方开奖结果体彩网:largest global vehicle🅷 manufacturers as measured by revenue are Volkswagen (VOW3), Toyota Motor Corporation (TM), and Stellantis (STLA).

Distributor Industry

Distribut🥂ors are the middlemen of industry. They buy wholesale quantities of a wide range of consumer eqౠuipment products, apparel, replacement parts, consumer electronics, and food products, repackage them, and then sell them on to retailers or to more specialized distributors.

Some distrib🐷ution companies have their own manufacturing faci🎉lities and buy raw materials to turn into finished goods.

Successfu🌳l companies in the industry develop networks of dealers and distr🌌ibutors.

One example of a company in the distributor industry is LKQ Corporation (LKQ), which is a distributor of vehicle replacement parts and components used in car repair and maintenance.

Diversified Consumer Services

The diversified consumer services industry includes companies that provide services to the public ranging from education to home security, legal advice, interior design, an꧂d consumer auctiꦉons. Most provide specialized services that are not classified elsewhere.

Examples of diversified consumer services companies include H&R Block (HRB) and Graham Holdings Company (GHC). H&R Block provides tax preparation, tax advice, and planning services. Graham Holdings is a diversified education and media company with well-known brands such as Kaplan and The Slate Group.

Hotels, Restaurants, and Leisure

The hotels, restaurants, and leisure industry is perhaps the most obvious example of a consumer discretionary sector. Companies that operate hotels, chain restaurants, resorts, casinos, or cruises could be the first to notice when consumer spending🅘 begins to lag due to economic stress.

Many companies in this industry do not own their real estate properties but act as operating companies and sign lease agreements. Many hotel and restaurant companies pursue 澳洲幸运5官方开奖结果体彩网:franchise business mod🐠els rather than direct ownershiܫp of their brands.

Examples of restaurant, hotel, and leisure companies include McDonald's and Carnival Corporation, the cruise vacation company.

Household Durables

The household durables industry manufactures products that are bought infrequently and lasﷺt for years. Examples include lawn and garden equipment, home and office furnishings, appliances, photographic equipment, and sporting goods.

Tempur Sealy International (TPX) is one example of a household durables company. It manufactures and distributes bedding products.

Leisure Products

Leisure goods i♏nclude camping equipment, toys, all-terrain vehicles, golf carts, swimming pool🐼s, and many other products that people use when enjoying downtime.

Companies that make and sell leisure products include toymaker Mattel (MAT) and Topgolf Callaway Brands (MODG).

Media

The media industry creat🎃es, markets, and delivers entertainment content for consumers, including movies, TV programming, newspapers, magazines, and 🐎radio.

One of the biggest players in the media market is The Walt Disney Compa𓄧ny.

Retail

Several retail industry categories fall under the umbrella of the consumer discretionary sector. Thꦕe following are among the most common.

Internet and Catalog Retail

Internet and catalog retail have been among the most rapid growth industries within the consumer discretionary sector, as consumers have shifted to purchasing goods online.

The industry includes companies that operate online marketplaces or individual🔴ly branded online stores that sell a wide variety of consumer products.

Amazon (AMZN) is a dominant player in this industry with billions in annual sales. The company reported a quarterly profit of $9.9 billion in the third quarter of 2023.

Multiline Retail

The multiline retail industry includes operato▨rs of department stores and other storefronts that sell general merchandise, such as hypermarkets and large-scale supercenters.

An example of a multiline retailer is Macy's (M), which operates Macy's, Bloomingdale's, and Bluemercury stores and websites.

Specialty Retail

The specialty retail industry includes companies that sell specific categories𓆉 of goods to consumers, such as apparel, electronics, home improvement, automotive retail, and home furnishings.

Examples of specialty retail companies include The Home Depot (HD) and Best Buy (BBY).

Textile, Apparel, and Luxury Goods

🥀 The textiles, apparel, and luxury goods industry includes manufacturers of clothing, footwear, anꦫd accessories such as handbags, sunglasses, and travel-related goods.

Examples of companies operating in this industry include Under Armour (UA) and Coach (TPR).

The Bottom Line

The consumer discretionary sector is made up of companies that produce and sell non-essential goods and services. These are things people don't necessarily need and can do without when times get tough.

That means that the stocks of companies i꧒n the sector are relatively volatile, f🦂alling in bad economic times and rising fast when conditions get better.

Investors shouldn't necessarily omit these companies entirely from their investment portfolios. Many consumer discretionary companies do very well during bull markets—especially when interest rates are low.