Many Australian retail investors gravitate towards the ASX consumer sector for investment ideas.
This sector is home to many recognisable names.
That includes consumer staples companies, including supermarket giants Coles Ltd (ASX: COL) and Woolworths Ltd (ASX: WOW). It also includes discretionary retail companies such as JB Hi-Fi (ASX: JBH) and Harvey Norman (ASX: HVN).
Investors may be looking for opportunities within the consumer space to buy in July ahead of reporting season.
Earlier this week, I shared 3 top picks, as named by Macquarie Group Ltd (ASX: MQG) in their recent Australian Consumer report.
These were Coles, Harvey Norman, and Bega Cheese Ltd (ASX: BGA).
In that report, the broker also named its 3 least preferred stocks in the sector.
What are they?
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Sigma Healthcare (ASX: SIG)
Sigma Healthcare was the first ASX consumer stock Macquarie named to avoid.
In FY25, Sigma Healthcare was one of nine ASX 200 stocks that more than doubled in value.
Macquarie expects FY26 returns to be far less spectacular, noting:
We retain our Underperform recommendation on SIG as we believe the market is giving too much credit on growth prospects (although we still expect sector leading earnings growth). The first result as a combined entity with Chemist Warehouse will be telling on growth potential and franchisee economics.
To accompany its underperform rating, the broker currently has a price target of $2.60 on Sigma Healthcare shares.
The upcoming earnings result will be the first following the merger with Chemist Warehouse. This will make comparisons with historical periods challenging.
However, the broker noted that Chemist Warehouse has a track record of consistently growing its store network, with Queensland and New South Wales remaining under-penetrated. Greater store openings could provide upside.
Endeavour Group Ltd (ASX: EDV)
Endeavour Group was the second ASX consumer stock Macquarie advised to avoid.
Endeavour Group's share price history is in stark contrast to Sigma Healthcare's, with shares falling 24% over the past 12 months.
Macquarie doesn't expect a turnaround anytime soon, noting:
We have become more cautious on EDV before the new CEO's formal commencement (early CY26), with rising competitive intensity, limited balance sheet flexibility and downside risk from program costs to weigh on the share price as we wait for a strategic update.
The broker has an underweight rating on Endeavour shares and a price target of $3.80.
For its upcoming FY25 result, the broker is expecting an 8% decline in EBIT to $971 million. Macquarie expects this to be driven by a decline in demand for off-premise liquor and operating de-leverage in the retail business with limited cost-out opportunities. However, the broker also acknowledged that any improvement in the off-premise liquor market could improve the ASX consumer stock's valuation.
Domino's Pizza Enterprises Ltd (ASX: DMP)
Domino's Pizza Enterprises was the third ASX consumer stock Macquarie suggested to avoid.
Domino's Pizza Enterprises has recently experienced a significant sell-off. It is now trading at its lowest level in over 10 years, having fallen 45% over the past year alone.
However, this is not a buying in the dip opportunity. Rather, Macquarie is suggesting the stock is now fairly valued.
Macquarie has a neutral rating on the stock and a price target of $18.40.
For its upcoming FY25 result, Macquarie is forecasting a 3% decline in EBITDA, driven mainly by its Asia segment.
Macquarie pointed to its ANZ segment as a potential source of upside. The broker noted that this segment had previously shown strong performance and that any return to these levels could raise the ASX consumer stock's share price.
