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Consumer discretionary sector lags behind S&P 500 in July

The S&P 500 Consumer Discretionary index recorded a total return of 1% in July, versus the 1.4% increase of the overall S&P 500 index, according to data compiled by S&P Global Market Intelligence.

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Stocks of many consumer discretionary companies suffered at the close of the month due to U.S. President Donald Trump's announcement of new 10% tariffs on $300 billion of Chinese imports, effective Sept. 1. Trump warned that the duties could be raised to 25% depending on how talks with Beijing progress. Panjiva analysis showed that the latest development in the trade war between the two countries will have a significant effect on the consumer sector.

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Toymaker Hasbro Inc. was the top consumer discretionary performer in July with a return of 15.3%, making it the eighth-best performing company in the overall S&P 500 index.

Hasbro's stock rose to a peak of $126.87 on July 30 after it reported that its second-quarter adjusted diluted EPS jumped 65% to 78 cents, surpassing analysts' expectations.

Wisconsin-based department store chain Kohl's Corp. followed the toymaker's performance with a return of 13.3% in July, rebounding somewhat from a sell-off initiated by the company's weak first-quarter earnings on May 21. Kohl's is expected to start seasonal hiring at its retail locations, distribution and fulfillment centers in August and will open five stores in the fall.

Coffee chain Starbucks Corp., which posted a 13% increase in July, raised its guidance for fiscal 2019 after reporting better-than-expected earnings for the third quarter. Its shares jumped to a 52-week high of $99.72 on July 26.

The Gap Inc. recorded a 10% return in July. The retailer was one of the weakest companies in the consumer discretionary sector in May and June.

Best Buy Co. Inc., which recently named Matt Bilunas as its CFO, recorded a gain of 9.8%. Guggenheim analysts started coverage of the electronics retailer on July 8 and said it is "one of the most undervalued" large-cap retailers, citing the company's ability to innovate.

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Home furnishing producer Mohawk Industries Inc. was the consumer discretionary company with the largest negative return at 15.4%. It reported July 25 that adjusted diluted EPS for the second quarter fell to $2.89 from $3.51, sending its shares down 17.6%.

Michigan-based auto parts company BorgWarner Inc.'s total return slid 10%. Its shares peaked at $42.48 on July 24 but have been on a downward trend since BorgWarner cut its fiscal 2019 earnings outlook to a range of $3.75 to $4 per share.

Under Armour Inc. posted a negative return of 9% in July and its shares fell further Aug. 1 due to the tariff announcement. The athletic-wear company reported a net loss for the second quarter and revealed that its North American sales dropped 3.2% year over year.

Ralph Lauren Corp., which saw a negative return of 8.2%, said its first-quarter 2020 adjusted diluted EPS grew to $1.77, above analysts' expectations. However, it warned that it was operating against a "more volatile backdrop" and said foreign exchange headwinds would impact full-year results.

Newell Brands Inc.'s total return slid 8% during the month. The owner of Rubbermaid and Coleman brands, which is in the midst of a divestiture plan, named a new CEO, Ravi Saligram, effective Oct. 2.