Earnings Preview: Tiffany & Co. (TIF), Express, Inc. (EXPR), and Guess?, Inc. (GES)

Retailers Tiffany & Co. (TIF), Express, Inc. (EXPR), and Guess?, Inc. (GES) are gearing up to report earnings

May 24, 2016 at 12:48 PM
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Earnings season has been winding down, and one sector garnering attention in recent weeks has been retail stocks, with a string of companies reporting dismal results. Due to take a turn in the earnings confessional tomorrow are three more retailers hoping to buck the disappointing trend: Tiffany & Co. (NYSE:TIF), Express, Inc. (NYSE:EXPR), and Guess?, Inc. (NYSE:GES).

TIF has given up 24% over the past 12 months, and recently gave up a foothold at its 80-day moving average. The shares are up 1.1% today at $64.69 as the broad market rallies, but could be in for more trouble should analysts continue to downgrade their ratings following tomorrow morning's earnings report. At present, eight out of 14 brokerage firms call TIF a "strong buy," with just one "sell" rating in the books.

Elsewhere, however, the stock has been plagued by pessimism. Short interest accounts for nearly nine sessions' worth of trading, at TIF's average daily volume, and in the options pits, traders have been picking up long puts at more than double the rate of calls in recent weeks. In fact, the equity's 10-day put/call volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits higher than 84% of the past year's readings, at 2.49.

The options market is currently pricing in a one-day post-earnings swing of 10.7% for TIF -- significantly larger than the average move of 4.5%, following the company's last eight quarterly reports. At last check, Tiffany & Co. (NYSE:TIF) options are changing hands at six times their typical intraday rate, with puts outnumbering calls by a 4-to-1 margin, and put volume on pace to finish at an annual high. Short-term bets are a favorite today, with nine of the 10 most active options belonging to the weekly 5/27 series, which expires at the close this Friday.

EXPR surged to a two-year high of $21.57 in early April, but has since given back 25.6% -- last seen trading at $16.05 -- after plunging to an annual low of $15.43 last week. The brokerage bunch is equally split between "hold" and "strong buy" ratings, while the average 12-month price target on the stock sits well overhead, at $22.97 -- a level not seen since late 2013. But short interest has been on the rise, climbing by nearly 52% during the two most recent reporting periods, and now represent 12.7% of the EXPR's available float.

In the options pits, meanwhile, long calls have vastly outnumbered puts in recent weeks, though options volume has been low on an absolute basis. Of course, it's possible this heavy preference for calls results from short sellers looking to hedge their bets against upside risk. Today, Express, Inc. (NYSE:EXPR) call options are trading at two times their average intraday rate, and quadrupling puts. Looking ahead, it appears the market is pricing in a 12.9% one-day post-earnings move for EXPR, which reports tomorrow morning. Over the last eight quarters, the stock has averaged a single-session swing of 8.3%.

GES is up 0.9% today at $16.54, but has shed 12.4% so far this year. The shares have been stuck below their 60-day moving average since their big post-earnings bear gap in March. Likewise, it looks like the $17 level -- which contained GES' mid-April pullback -- may now be causing trouble for the stock. In and out of the options pits, expectations for the equity appear dim. Currently, 73% of analysts rate GES a "hold" or "sell." Also, short interest is elevated, accounting for nearly 12 days' worth of trading, at the stock's typical pace.

At the ISE, CBOE, and PHLX, meanwhile, the stock's 50-day put/call volume ratio of 2.50 is docked at the top of its annual range. Options volume has been relatively light on an absolute basis, however. While Guess?, Inc. (NYSE:GES) has made a single-day post-earnings move of 8.4%, on average, over the last eight quarters, the options market is pricing in a wider 11.3% swing, following tomorrow night's report.

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