Between inflation and a looming recession, consumers are looking to rein in spending — and that means some “traded-down” stocks will outperform this year, according to Bank of America. Consumers are already bracing for the cuts, with retail sales falling 1.1% in November to December. Inflation is still high, although it is starting to come down. Meanwhile, Bank of America economists are predicting a mild recession in the first half of 2023. “We expect ‘trade-downs’ for low-ticket options to increase in most discretionary categories, as wealthier consumers also seek value access,” wrote analyst Robert Ohms. In a note on Wednesday. In this environment, he favors stocks that fit within at least one of three themes: trade-down winners, undervalued leisure brand/retailer transformation and recovering fitness clubs. Here are three of the trade-down picks from Bank of America that Ohms expects to outperform in 2023. Consumers looking to save money on gym memberships can skip their mid-tier gym and join Planet Fitness for $10 to $25 a month. Supporting Ohms’ view are earlier patterns. Ohms said that during the 2008–2009 recession, Planet Fitness’ same-store sales were down an average of 21% as consumers shifted away from higher-priced options. He sees significant opportunities for the club’s growth and rising royalty rates and believes its differentiated business model should drive market growth by targeting at least a handful of consumers. Ohms said Planet Fitness is also rapidly growing its margin and return on invested capital as well as its equipment segment. The fitness franchise announced earlier this month that it was looking to add 1.8 million new members in 2022, taking its total membership to 17 million. It was also named a top pick by Piper Sandler, who said she likes the company’s recession-resilient model. PLNT 1Y Mountain Planet Fitness’ 12-Month Performance Bank of America’s $100 per share price target represents 21% upside from Tuesday’s close. According to Oms, Academy Sports and Outdoors should also do better this year. He noted that the sporting goods and outdoor recreation retailer’s offering of branded footwear and apparel at lower prices resulted in positive same-store sales in the past downturn. Ohms pointed out that Academy’s long-term earnings-per-share compound annual growth rate is slightly higher than the average among athletic and sporting goods retailers. However, he sees significant earnings upside compared to conservative estimates. Ohms said the retailer also offers a wide range of solitary holiday merchandise and should benefit from budget-conscious millennials increasingly shopping at discount stores. The stock has 25% upside versus Bank of America’s $70 price target at Tuesday’s close, wrote Ohms, adding that Solo Brands provides an alternative for those who still want to enjoy a nice backyard fire pit. caters to those looking to trade-down from premium brands. Its Solo Stove fire pits include a tabletop version that retails around $120 to its largest backyard version, which costs more than $400. The company went public in October 2021 and has struggled through 2022 with a 76% decline. However, Oms expects its promotional pricing strategy to work well in an inflationary environment. His $9 per share price target represents a nearly 120% upside from Tuesday’s close. — CNBC’s Michael Bloom contributed to this report.