The consumer discretionary sector is made up of companies that provide non-essential goods and services.
This sector can experience volatility as it is sensitive to changes in the economy, consumer confidence, and disposable income.
Think of things like expensive cars, holidays, electronics, etc.
Unlike essential services like healthcare, consumers might be quick to cut out these purchases in times of economic downturn.
However, two of the largest companies by market capitalisation on the ASX 200 are in the consumer discretionary sector.
Let's see how investors have been rewarded over the last 5 years and what factors have influenced the strong returns.
Wesfarmers Ltd (ASX: WES)
Wesfarmers is the owner and operator of well-known retailers and stores, Bunnings, Kmart, Target, and OfficeWorks.
Over the last five years, it has increased by 100.92%.
For context, the S&P/ASX 200 Index (ASX: XJO) is up roughly 46% in that span.
During this time, its success has come on the back of continued dominance by Bunnings in the hardware/DIY space.
According to the ABC, it made $18.97 billion in revenue in 2024, five times more than its nearest competitor.
Furthermore, its profit margin was 16.8%, almost double the margin generated by Coles Group Ltd (ASX: COL) or Woolworths Group Ltd (ASX: WOW).
It's not just Bunnings, though. Kmart and Officeworks have largely generated stable and resilient cash flows over the past several years.
If you were wise enough to invest $10,000 in Wesfarmers five years ago, that investment would be worth a touch over $20,000 today without including any dividend payments.
More importantly, some experts are still confident there is further room to grow for this consumer discretionary company.
Aristocrat Leisure Ltd (ASX: ALL)
Another ASX 200 consumer discretionary company that has had huge returns over the last five years is Aristocrat Leisure.
The company manufactures gaming machines, designs games, and provides gaming systems, consulting services, and gaming accessories.
Over the last five years, it has increased by 151.34%.
That means a hypothetical $10,000 investment in this consumer discretionary company made five years ago would today be worth $25,134.
The share price growth for this blue-chip ASX 200 company has been driven by consistent and steady earnings growth across the past five years.
Broker Bell Potter still sees plenty of upside in this ASX 200 stock. It currently has a buy recommendation and price target of $79.00, which indicates a 22.35% upside.
