Retail stocks are on a fire sale again today. Kohl’s (KSS) reported an unexpected loss of $0.24 a share in the first quarter. Comparable sales fell by 4.4% in the quarter.
Investors who relied on inflation reports wrongly believed consumers had less disposable income. Persistent inflation is forcing Kohl’s customers to delay buying things they do not need. In the women’s business, consumers spent less at Sephora.
Wait for the tough macro-operating conditions to improve. This requires a drop in inflation levels, continued job growth, and a strong economy.
Be wary of holding any retail stocks. This includes Macy’s (M), Nordstrom (JWM), and Dollar Tree (DLTR). Costco (COST), which reported Q3 comparable sales of 6.5%, is the exception. Additionally, Walmart (WMT) runs a healthy business and is worth considering.
In the travel sector, avoid American Airlines (AAL) and Norwegian Cruise Line (NCLH). Instead, consider Royal Caribbean (RCL) and Carnival (CCL).
In the AI sector, Microsoft (MSFT) is starting to look cheap. The stock lost 3.68% in the last week, closing at its 50-day simple moving average. While the stock has technical risks and could fall to $380, the software firm is the biggest winner in the AI software space.
Hardware sales are a catalyst. Microsoft launched a refreshed line of Surface AI PC devices. Corporate customers are the likely buyers of this hardware.
