The retail landscape, moving into the holiday season, is setting up to be grimmer than ever…
Everything from electronics to shoelaces (yes, shoelaces) are hard to come by because of supply bottlenecks in China and California, and factory closures around the globe. Now, anyone and everyone touching the industries that are wholly reliant on global supply chains have been knocked down – and retail is feeling it more than others.
Over the last month, we’ve seen…
- NIKE Inc. (NKE) drop 11%
- Bed Bath and Beyond Inc. (BBBY) drop 40%
- And Helen of Troy Limited (HELE) drop 5%
But that’s the very reason why I am watching these companies. They’re trading at a steep discount compared to what they will be in the coming months…
Just take a look at the numbers.
Two weeks ago, NKE reported solid revenue and diluted earnings, which represented year-over-year increases of 16% and 22%, respectively.
Additionally, the company reported NIKE Direct sales of $4.7 billion, up 28% on a reported basis, and NIKE Brand Digital sales increased 29%.
Any way you cut it, those are very solid results, but the stock has dropped nearly 10%, since it reported Q1 results. That’s not surprising considering increasing concerns about possible supply chain constraints.
That pull back has created opening for a longer-term opportunity – and now’s the time to act.
As I write this, NKE is trading right at its 200-day moving average (MA). That’s a big deal, because the 200-day MA is a key support level used by professional investors who are looking to buy shares.
I like buying the NKE December 17, 2021 $150/$155 Call Spread for $2.00 or less. Plan on selling this spread for a 100% profit.
Much of BBBY’s collapse came after the company reported Q2 results that included a small miss on revenue, a big miss on the bottom line, and lowered Q3 and FY guidance.
At the core of the disappointing earnings was lower foot traffic due to COVID and continuing issues with the supply chain.
That sounds bad, I get it, but there’s a positive. The company is sitting on more than a billion in cash, so it won’t need to take on more debt or dilute shares to continue operating.
Additionally, the company is going into the holiday season right at the same time as we’re seeing signs that the effects of the Delta variant are waning. That could end up being great for Q3 numbers.
Those are both good, but what really has me excited about BBBY is the short percentage of float is a whopping 45.01% (as of September 15, 2021), which makes BBBY a prime target for the Reddit short-squeeze crowd to come in drive shares higher.
Possibly much higher, very quickly.
I’ve been following BBBY for a while and now it looks more attractive than ever – but only if the stock pulls back a little more to reflect the lowered guidance.
If shares of BBBY close below $15.35 by October 15, 2021, I like buying the BBBY November 19, 2021 $15/$16 Call Spread for $0.40 or less. Plan on closing the trade for a 100% profit.
And then there’s Helen of Troy Limited (HELE).
The name, Helen of Troy, might not be familiar to you, but you’ve probably seen its kitchen and bathroom gadgets and accessories, health-related items, and beauty products in your favorite mass merchandisers, drugstore chains, warehouse clubs, home improvement stores, grocery and specialty stores, beauty supply, and e-commerce retailers.
The company is scheduled to report Q2 results on Thursday, which is why we’re looking at the stock today.
Analysts are expecting the company to post quarterly earnings of $2.13 per share, which would represent a year-over-year decline of -43.5%.
I don’t know if the company will beat or miss expectations of Thursday, and frankly, I don’t care. I care about is using history as a gauge in order to make a quick profit.
In each of the last four quarters, shares have briefly pulled back, sharply, when the company reports quarterly results – even though the company has beat earnings for three of the last four quarters.
Considering the history of selling-off after reporting, I like buying (today) the HELE October 15, 2021 $220/$210 Put Spread for $5.00 or less. These options will expire next Friday, October 15, 2021, so plan on exiting this position for a 50% profit, or by this Friday (October 8th), whichever comes first.
Now this won’t be the last you’re hearing about retail from me. I’m working on a special Money Map Report to address the future of retail and how you as an investor can benefit.
Stay tuned,
— Shah Gilani
Source: Total Wealth