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Kohl’s, Abercrombie & Fitch, Intuit: Trending stocks to watch

The Yahoo Finance Live team discusses the rise of Kohl's stock on Q1 profits amid the reduction of excess inventory, the rise of Abercrombie & Fitch stock after the retailer topped Q1 estimates, consumer spending trends, and the decline of Intuit stock amid tax season revenue misses.

Video transcript

AKIKO FUJITA: Well, retail in focus yet again. So let's do a quick check of shares of Kohl's. That stock seeing a big pop today, up about 7 and 1/2% after the retailer grew its profit and managed to reduce its excess inventory in the first quarter. Seana, we were talking about this earlier about what this means for the consumer. We sort of try to glean information from any number of these retailers.

In the case of Kohl's, it does point to that value play. We keep hearing over and over, consumers looking for some value, especially as they get squeezed. The inventory thing we're talking about, yes, that led to an average ticket decline because they did have heavy discounts, but the company also said they saw increased foot traffic, and customers were buying more items. So that suggests that in a good value, even in this environment, customers are looking to buy here, but it's got to be at the right price point. And that's kind of where Kohl's is looking for.

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SEANA SMITH: Kohl's does have the advantage when it comes to that price point, given the fact that they are viewed as a value play. But I think the big question going forward is how much people, how much consumers are going to be spending on discretionary purchases. And that's something that Kohl's really relies on when it comes to retail, not necessarily some of those necessity purchases that we have seen at some of the other larger retailers, like Walmart, which is also a value play, but better positioned, given the reliance or given the fact that their grocery division makes up such a large part of their revenue.

But Kohl's saying that they are positioned OK among those value play department store names here. Over the last year, this company has been under tremendous amount of pressure with shares off just about 40%. So the new CEO there, Tom Kingsbury, certainly making some progress since he took over in February, but a ways to go in order to get shareholders back on board.

Another play that we're looking at here, Abercrombie. Shares surging today, closing up just over 30% after the fashion retailer posted stronger than expected first quarter profit, boosted its annual outlook here when you take a look at some of the comments here on the earnings call from the CEO saying that the company has raised prices by double digits since the pandemic. They've done that for both of their brands, so both Abercrombie and Hollister there, Akiko. And she said that it's obviously a good move here from the retailer because consumers have shown that they're willing to pay those higher prices.

AKIKO FUJITA: Yeah, the Abercrombie store is in a better position than their Hollister stores. They did talk about some of the challenges, especially with the teen consumer. But you're certainly right about where they are positioned right now. We were having this conversation this morning, Seana, about where Abercrombie is right now and how they've been able to transform their brand, change the image from where we remember it to be more than 10 years ago, and then bring these consumers on board even in a time of inflation. So that certainly points to the strength of the brand and the strategy for the company.

Inventory, another thing we were talking about earlier today, it's pulling back significantly from where it was last year. And I thought you brought up a good point here. It is fascinating to think a year ago, we were talking about the inventory and just the pile-up that we were seeing, especially in freight. It took that long to clear some of this inventory. We're still seeing discounts that are being had there. But in the case of Abercrombie, they have seen a significant improvement on that front.

Let's move on here to Intuit shares falling today after its tax season revenue fell shy of estimates on fewer than anticipated filings. In the company's earnings call, CEO Goodarzi said it's possible the government run tax filing system will cost taxpayers billions. And you see the stock getting hit about 7 and 1/2% there. The big question for me, Seana, when you think about a company like Intuit, what it means if the government does move forward with their e-filing, because that's where they get a bulk of their revenue, things like TurboTax, there's a lot of questions there about what it means for the company moving forward.

SEANA SMITH: Yeah, certainly, it could be a massive challenge here for Intuit, given the fact that they're already looking at lower volumes for their most recent quarter. They reported lower volumes than the Street was expecting, so another challenge here going forward or another potential headwind, obviously, something that shareholders are taking a little bit of issue with.

One thing, though, that Intuit did use to its advantage when speaking about some of those lower volumes, they were able to balance that risk here with better pricing. So that's something that was able to cushion some of the blow that the company did see over its most recent earnings report. But again, that trend here is a little bit concerning.

One other highlight that I want to point out, though, when it comes to that better pricing, also small business and self-employed segment, that was coming in better than expected, better than what the Street was forecasting. 24% growth here in terms of that outlook, up from 19% to 20%, so incrementally better there. But again, I think the big question is down the line, what exactly that e-filing here for the government, what that would do to Intuit's business.