Macy's Bullish Options Prices Implode as Retail Stocks Sell Off – Schaeffers Research

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Retail stocks are in focus today, as a number of companies release holiday sales numbers. The results aren’t earning any accolades on Wall Street, though, with department store names J C Penney Company Inc (NYSE:JCP) and Macy’s Inc (NYSE:M), as well as Victoria’s Secret parent L Brands Inc (NYSE:LB) all slumping in early trading. Here’s a closer look at how shares of JCP, M, and LB are performing this morning — even as the Dow topples 25,000 for the first time ever.

J C Penney Stock Slides After Holiday Sales Data

J C Penney said same-store sales (SSS) rose 3.4% year-over-year in the November-to-December period. The retailer reaffirmed its fiscal 2017 outlook, and said full-year comparable sales will be flat — in a best-case scenario — which may be what has the shares down 3.6% at $3.57, despite an initial positive reaction in electronic trading and a price-target increase to $4 from $3 at Jefferies.

This negative price action just echoes JCP stock’s longer-term trajectory, with the shares down roughly 58% over the last 52 weeks. And while the shares have come off their Nov. 8 record low of $2.35, this rally was quashed by J C Penney’s 120-day moving average this week — a trendline that’s kept a tight lid on the shares for the past 13 months.

Short sellers have been firmly in control of the retail stock, too. The 136.58 million JCP shares that are currently sold short account for almost half of the stock’s total float, representing 8.5 times the average daily pace of trading.

Macy’s Stock Could Find Key Technical Support

Macy’s stock is down 5.3% to trade at $24.03, even after the Cincinnati-based retailer saw its price-target hiked to $26 from $21 at UBS and reported a 1% rise in comparable sales in the last two months of 2017. The company also said it expects a slightly lower-than-expected decline in full-year SSS, and announced plans to close another 11 stores and cut roughly 5,000 staff positions.

Though M stock is still staring at a more than 33% year-over-year deficit, the shares have been paring these long-term losses since hitting a seven-year low of $17.41 on Nov. 7. The shares are now testing the $24 level, which coincides with a 38.2% Fibonacci retracement of their 2017 slide.

Against this backdrop, Macy’s stock call options are remarkably cheap at the moment, relative to their put counterparts. M’s 30-day implied volatility skew of 10.8% ranks in the 97th annual percentile, according to Trade-Alert.

Victoria’s Secret Woes Slap L Brands Stock

Though L Brands said SSS rose 1% in the two-month holiday period, declining comparable sales at Victoria’s Secret prompted the retailer to cut its fourth-quarter guidance. As a result, LB stock has plunged 14.6% to trade at $49.65, landing on the short-sale restricted list.

Heading into today’s trading, the stock had been in a steady uptrend since bottoming at a five-year low of $35 in mid-August — up 66% at last night’s close. However, LB shares have now breached their formerly supportive 20-day moving average and the round $50 level.

Additional losses could have analysts re-evaluating their ratings on L Brands stock. While the majority of the 24 brokerages are skeptical toward the retail shares, nine still maintain a “buy” or “strong buy” rating.

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