There has been cooling inflation in recent months. However, the United States has still been fighting to control inflation rates. The Federal Reserve’s switch to a more hawkish monetary policy has pushed consumers’ costs of living higher.
The U.S. Consumer Price Index (core CPI) sent shockwaves through Wall Street in April after coming in at a hotter-than-expected 3.6%, putting earlier hopes of Q1 2024 interest rate cuts on ice.
Despite CPI hitting expectations in June 2024, the Fed held interest rates at 5.25%. But how can this help used and discount clothing retailers to improve their position on Wall Street?
As the summer months approach, more consumers will be conscious of adapting their wardrobes for warmer weather. With lingering high living costs and interest rates, we’re more likely to see cost-effective retailers flourish as the summer holidays approach.
With consumer spending power likely to be impacted for longer than expected by 2024’s CPI data, the summer could be a prosperous time. Here are three stocks that could benefit from cooling inflation:
Stocks to Buy During Cooling Inflation: eBay Inc (EBAY)
Looking at the 2008 financial crash and subsequent recovery, eBay (NYSE:EBAY) is an example of a stock that is well-suited to serving cash-strapped consumers.
The reselling platform more than doubled in value throughout 2009 and 2010. They also posted 23.59% growth over the first half of 2024 amid lingering economic challenges for many U.S. retailers.
Although eBay caters to a wide range of industries, new fashion-focused competitors have recently prompted the firm to improve its service for clothing resellers.
In response to the emergence of competitors like Depop and Vinted, eBay opted to remove its fees for second-hand clothing listings.
eBay’s exceptional performance in 2024 has been challenged by the firm announcing Q2 2024 revenue forecasts. They fell below expectations of $2.56 billion to a range of $2.49 billion to $2.54 billion for the quarter.
Falling consumer spending power has been blamed for eBay’s slower performance at this year’s stage. It may have resulted from a slower-than-expected economic recovery from the recent period of high inflation.
Despite this, the stock remains a solid bet for attracting cash-conscious consumers seeking to make their summer purchases for less. I think it is one of the best stocks to buy during cooling inflation.
TJX Companies Inc (TJX)
Despite eBay’s recent struggles, TJX Companies (NYSE:TJX) has enjoyed a strong start to the third quarter, posting growth of 5% in the opening three weeks of June alone.
TJX reported a 3% rise in overall store sales from the quarter through May 4, a flurry that the store claims was ‘entirely driven’ by a rise in customer transactions.
Additionally, net sales were up 6% over the same period in 2023, reaching $12.5 billion. International sales for TJX stores in Europe and Australia grew 7% to $1.5 billion.
The rise in optimism towards TJX stock has been buoyed by a recent rating increase from UBS analysts. In May, they upgraded the stock to a ‘buy’ rating from ‘neutral,’ citing a potential price-to-earnings expansion. This shows a prospective increase in earnings before interest and taxes EBIT profit margins.
With this in mind, TJX remains a strong consideration for investors even despite its recent outperformance on Wall Street.
Target Corp (TGT)
After an exceptionally strong first quarter, Target (NYSE:TGT) stock has fallen back down to earth. It retracted from growth of almost 24% to open the year to a decline of more than 12% between April and June 2024.
This timely discount can help to offer investors a strong entry point ahead of the summer months.
There’s plenty of evidence that Target is seeking to cater to budget-conscious consumers in the months ahead. In May, the discount retailer announced that it would be cutting prices on 5,000 frequently bought items to aid shoppers impacted by the cost of living.
Although the discounts have been largely focused on consumer staples, they can help drive more visitors to stores.
Target’s recent Wall Street difficulty stems from a mixed Q1 2024 earnings report. The report saw sales fall 3% year-over-year and fail to meet earnings expectations. However, in sticking with its annual earnings forecasts, there’s optimism that the retailer will post a stronger performance.
One of Target’s biggest appeals is that it’s a dividend stock. This can be especially useful to investors during times of market uncertainty. Target’s position as a strong performer can be a great draw for investors seeking profits during market downturns.
On the date of publication, Dmytro Spilka 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.
