After enduring a long period of high inflation and elevated interest rates, many U.S. consumers are feeling some pain, multiple data points strongly suggest. According to Axios, credit card delinquency rates rose 1.8 percentage points versus this time last year to 7.2%, and 8% of auto loans were delinquent at the end of Q2, representing a year-over-year increase of 0.7 percentage points. Both metrics reached their highest level since the pandemic.
Moreover, the unemployment rate increased to 4.3% in July versus 4.1% in June, setting a nearly three-year high. And multiple companies, including Darden Restaurants (NYSE:DRI), and Yum Brands (NYSE:YUM) , noted that their sales did not increase much or at all in the first quarter of the year.
Here are three stocks to sell amid the consumer spending pullback.
Kohl’s (KSS)
Not many brick-and-mortar store chains focused on apparel are prospering. As such, Kohl’s (NYSE:KSS) struggles in the current environment are unsurprising.
In the first quarter, the firm’s comparable sales sank 4.4% versus the same period a year earlier, while it generated a per-share loss of 24 cents. In Q1 of 2023, the apparel retailer reported earnings per share of 13 cents. Moreover, the company predicted that its revenue would drop between 2% and 4% this year. Previously, it had expected its annual sales growth to fall between a 1% decline and a 1% increase.
Speaking on the company’s Q1 earnings call on May 30, CEO Tom Kingsbury reported that the demand for the company’s “regular priced” offerings had “softened in late March and into April,” The slowdown suggests that the company had been hurt by weaker consumer spending.
With that trend likely to intensify going forward amid the deteriorating job market, I certainly view Kohl’s is one of the stocks to sell at this point.
Airbnb (ABNB)
Airbnb (NASDAQ:ABNB) disappointed investors on Aug. 6 by estimating that its EBITDA, excluding certain items, would not increase significantly during the current quarter. Moreover, the firm predicted that its adjusted EBITDA margin would probably fall this quarter versus Q3 of 2023.
And in its Shareholder Letter, the company wrote that it expects the growth of its nights and experiences bookings to decelerate during the current quarter versus Q2. Airbnb added that it was “seeing shorter booking lead times globally and some signs of slowing demand from U.S. guests.”
Moreover, in Q2, Airbnb’s earnings per share fell to 86 cents from 98 cents in Q2 of 2023. Analysts on average, had expected the company’s Q2 EPS to come in at 91 cents.
In light of the slowing trends that Airbnb is experiencing, I do view it as one of the consumer stocks to sell at this point.
Starbucks (SBUX)
During Starbucks’ (NASDAQ:SBUX) fiscal third-quarter earnings call, held on July 30, the company repeatedly stated that its financial results had been negatively affected by “the challenging consumer environment.” Indeed, the firm appeared to blame reduced overall consumer spending weakness for the 6% decline of traffic in its U.S. stores, as it noted that the sales volumes of its products in grocery stores had actually risen last quarter.
In North America, the firm’s comparable sales fell 2% last quarter versus the same period a year earlier, while its comparable sales in China tumbled 14% year-over-year. As in North America, Starbucks is facing a tough combination of very intense competition and negative consumer spending trends in China.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor held a LONG position in SBUX.
