Earnings Preview: Costco Wholesale Corporation, Lululemon Athletica inc., and Men's Wearhouse Inc

Retailers Costco Wholesale Corporation (NASDAQ:COST), Lululemon Athletica inc. (NASDAQ:LULU), and Men's Wearhouse Inc (NYSE:MW) are all headed to the earning stage shortly

by Alex Eppstein

Published on Dec 8, 2015 at 12:03 PM

While most major earnings reports are already in the rear-view mirror, a few biggies are still coming up -- especially on the retail front. About to step into the quarterly spotlight are Costco Wholesale Corporation (NASDAQ:COST), Lululemon Athletica inc. (NASDAQ:LULU), and Men's Wearhouse Inc (NYSE:MW). Below, we'll take the pre-earnings temperature of COST, LULU, and MW.

  • COST will report fiscal first-quarter earnings after the closing bell tonight, less than a week after publishing some rock-solid sales figures. In the aftermath of the company's past eight turns in the confessional, the stock has averaged a 1.6% move in the ensuing session. Based on Costco Wholesale Corporation's near-term at-the-money (ATM) straddle, though, the market is pricing in a larger 2.9% post-event swing this time around. Traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have upped the bullish ante in the days leading up to this afternoon's report. COST's 20-day call/put volume ratio has jumped to 1.52 from 1.08 during the past week. Perhaps these call buyers are encouraged by the performance of the stock, which has added over 16% quarter-to-date to trade at $168.16, and hit a record high of $168.78 earlier today.

  • LULU is slated to tell all before the open tomorrow, and the options market is pricing in a 10.9% move in the aftermath of the event -- which is pretty typical, based on earnings reactions over the past eight quarters. Heading into the event, skepticism runs high. Lululemon Athletica inc's Schaeffer's put/call open interest ratio (SOIR) of 0.88 sits 2 percentage points from a 12-month peak, and over one-quarter of its float is sold short. Should the shares rally on positive earnings, a capitulation among these naysayers could add even more fuel to the fire. At last check, LULU is perched at $52, having rallied 8.7% so far in December.

  • MW traders are put-focused heading into tomorrow night's earnings release, and why not? The stock has plummeted 54.5% in 2015 to trade at $20.07, after gapping lower on last month's profit warning. Specifically, Men's Wearhouse Inc's SOIR of 0.68 outstrips 85% of comparable readings recorded in the last 52 weeks. Looking back eight quarters, the shares have swung 6.4% on average in the wake of quarterly results. This time around, MW's near-term ATM straddle is pricing in a much bigger 12.5% move.

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