The U.S. unemployment rate remains relatively low at 4.3%, although it is rising as employers hire at a slower pace than earlier in the year. The U.S. Bureau of Labor Statistics' early-September Job Openings and Labor Turnover Summary reported 7.7 million job openings, marking the lowest level since early 2021. All of this has fueled further speculation that the Federal Open Market Committee will cut interest rates by at least a modest amount in its meeting this month.

Investors preparing for this anticipated change in the federal funds rate might consider the consumer discretionary sector. Many companies in this space stand to benefit from a decision to lower interest rates because of the uptick in consumer spending that often follows. The two stocks below each enjoy an overall buy rating from analysts and an average price target representing an upside potential as high as 34%.

Lincoln Educational Services: Growing Revenue, EBITDA

Lincoln Educational Services Corp. (NASDAQ: LINC), the company behind technical schools such as Lincoln College of Technology, is well-positioned to advance in a lower-interest-rate environment in which more potential students are likely to enroll in its programs.

A look at the firm's last quarterly report shows its upward trajectory. Revenue climbed by more than 16% year-over-year, and adjusted EBITDA more than doubled over the same period. Underlying this growth is an increase in student starts of more than 12% relative to the same quarter last year. Students start at Lincoln's East Point, Georgia, campus for the first four months of the year, which already topped the company's estimates for all of 2024.

Enrollment is likely to continue growing as Lincoln prepares to launch new campuses in Tennessee and Pennsylvania in the first half of 2025 and another new location in Texas later next year.

Based on expectations for the end of the year, Lincoln has boosted its full-year revenue guidance to a range of $423 million to $430 million and the lower end of its adjusted EBITDA range to $39 million.

At the same time, new campuses will also bring increased facilities and operational, administrative, and education services expenses.

Given Lincoln's recent struggles generating free cash flow, it will need to continue improving efficiency to boost its bottom line. 

Skechers: Targeting the Fast-Growing Performance Athletic Segment

Footwear and apparel company Skechers USA Inc. (NYSE: SKX) posted record sales in the most recent quarter, with domestic sales up nearly 8% year-over-year and international sales up by 7%. The potential for growth in the athletic footwear space is significant: McKinsey values the global wellness industry at $1.8 trillion, with the U.S. portion of that market growing by up to 10% per year.

Perhaps it's no surprise, then, that Skechers is refocusing its efforts on performance athletic products after having been known primarily for its casual sneakers. The move is a savvy one, as it not only taps into the rapidly-growing wellness space but also allows Skechers to improve on its existing product lines without having to explore new consumer segments.

As part of the shift, the company plans to change its basketball target audience to consumers, rather than professional players.

This change in focus is a reason why investors may want to keep Skechers in mind, even as rivals like Birkenstock (NYSE: BIRK) have reported faster revenue growth recently.

Another reason to watch for continued growth, particularly if lower interest rates free up consumer spending money, is the company's aggressive expansion of its brick-and-mortar footprint. Skechers spent almost $50 million last quarter opening dozens of new locations.

Outside of the U.S., Skechers also achieved sales growth in China despite foreign currency headwinds in the latest quarter. An uptick in China's economy could further fuel top-line gains.

Rate Cuts Imminent, But How Much?

Federal Reserve chair Jerome Powell has made it clear rate cuts are on the way in September, but the extent of those cuts remains to be seen. Similarly, timing the purchase of a consumer discretionary stock to try to maximize the benefit of a rate cut is difficult at best. Nonetheless, Lincoln Educational and Skechers are two firms to watch in the coming weeks and months.