Long Time Ago
Remember Tuesday morning? Short weeks are always long. No kidding. If Italy, and Spain were not enough for traders to deal with, the crowd has also had to figure in the impact of a bevy of macro-economic data points, the unexpected inclusion of both Canada and Mexico in the decision to end exemptions for the implementation of steel and aluminum tariffs on US allies, and wild volatility across most sectors. All of this has had quite the impact on Treasury prices, US dollar valuations, as well as prices for commodities such as gold and crude...and oh, weren't there a few high profile earnings released overnight?
One Nasty Plate of Nachos
Any of you kids hang around to watch Lululemon Athletica (LULU) put their numbers to the tape? Yoga pants rule!! No kidding. In case you did something stupid last night and buried your face in a nasty plate of nachos while watching sports on television, let me throw a few digits at you.
LULU beat expectations on both the top and bottom lines. That's not even the fun part. Total comp sales increased by 20%. More importantly, what makes up that 20% was 8% growth in same store sales, and a simply incredible 62% spike in "direct to consumer" revenue. Who needs brick and mortar? Maybe not these guys. Remember former LULU CEO Laurent Potdevin? Who? Exactly. When Potdevin stepped down on February 5th, the stock was trading around $74 bucks. Last night, in the after hours session, the shares ran about 7%. The last sale I see is a mind-blowing $112.48. I thought Athleisure was dead. Think again, cowboy. The firm has yet to name a permanent successor to the Chief Executive slot, and apparently does not need to. How could anyone beat this? For the full year, LULU raised EPS guidance from a range of $3 to $3.08 to a range of $3.10 to $3.18, which will put the corporate guidance more in line with what analysts were already saying.
The "Ugly" Stick
The stick was out hunting last night, and despite what look like both top and bottom line beats, the stick landed squarely on Ulta Beauty (ULTA) . That my friends is how you use the words "ugly" and "beauty" in the same sentence. It's not really the firm's fault. They ripped the cover off of the first quarter ball. They guided Q2 EPS expectations to a range of $2.35 to $2.40 on revenue of somewhere between $1.47B and $1.49B.
...and therein lies the problem. Wall Street was higher than that for this firm that quarter. Consensus views on the second quarter for ULTA were up around $2.49 on revs of $1.49B. Know what, 249 was our panic point for this name. That spot broke prior to the close. the next line of defense for this name technically would be 234, and that is precisely where the shares went overnight. If 234 holds, then gang...these shares are completely tradable. Let me show you.
Know what I think? I think that ULTA still posts Operating Margins and consistent sales growth rates that you just don't see all that much of in the retail space these days. I am far more likely to buy these shares this morning than I would be to sell them if I were already long. Target price? Why not 249 itself? 264 is anything but crazy. Know any folks who shop at ULTA? I do. Know any who hate the place? Me neither.
Don't Fall In Love
Walmart (WMT) is possibly the name that brings me closest to breaking my first rule of trading. What's not endearing about a firm that fights back? While e-commerce in general, and Amazon (AMZN) in specific was out laying waste to most of the retail sector over the last couple of years, Walmart kept buying up smaller e-businesses such as Jet, and forging strategic alliances as they have with Alphabet (GOOGL) . Walmart was a solid performer for this guy in 2017. In fact, the kid took advantage of weakness across the space last year to profit from the likes of Kohl's (KSS) , and Macy's (M) as well.
Being a trader, I took my leave, and eventually re-entered all of these names. Guess what? They all seem to be working quite nicely for me again. Except for Walmart. My problem child. Raise wages? I'm a fan. That wins local support despite hampering margins. Help employees with tuition? Even better. JP Morgan analyst says that Amazon will match Walmart in US sales by 2021? Uh oh.
Still, Walmart fights back. I truly love that about this firm. Compete with Amazon and Alibaba (BABA) in India by grabbing Flipkart? Excellent. An eventual spin-off could be worth a lot of dough. Test concierge shopping services in urban America? Awesome. No, Walmart is not going away, but where do you plant the flag? The firm holds their meeting with their associates this morning at 9 am ET. Then they'll answer questions for their investors at 13:15 ET. If this does not push the shares in the right direction, then Houston, maybe we have a problem. If you trade this stock, you need to pay attention this afternoon. None of that late Friday tomfoolery. Got it?
See the Fibonacci Time Zones? These have been nearly precise in timing the last few disruptive moves in market pricing for Walmart. Please notice that if our famous twelfth century Italian mathematician is spot on, WMT is due for some excitement in very early June. Oh wait...today is very early June. Goose bumps.
Target Price: 87.50
Pivot Point: 80
Panic Point: 76
Looks like the August $75 puts could still pay a rough $0.75. That could possibly come in handy, either as lunch money or a point of reduce entry if so forced.
May Employment Situation (08:30 ET)
Non-Farm Payrolls: Expecting 187K, Last 164K.
Unemployment Rate: Expecting 3.9%, Last 3.9%.
Average Hourly Earnings: Expecting 2.7% y/y, Last 2.6% y/y.
Average Workweek: Expecting 34.5 hrs, Last 34.5 hrs.
Participation Rate: Last 62.8%.
Underemployment Rate: Last 7.8%.
Other Economics (All Times Eastern)
All Day - Total Vehicle Sales (May): Expecting 17.1M, Last 17.2M annualized.
08:55 - Fed Speaker: Minneapolis Fed Pres. Neel Kashkari.
09:45 - Markit Manufacturing PMI (May-f):
10:00 - ISM Manufacturing Index (May): Expecting 58.2, Last 57.3.
10:00 - Construction Spending (April): Expecting +0.8% m/m, Last -1.7% m/m..
13:00 - Baker Hughes Oil Rig Count (Weekly): Last Week 859.
Today's Earnings Highlights (Consensus EPS Expectations)