2 Retail Stocks Hitting New Highs After Strong Holiday Sales

KSS stock remains heavily shorted, despite recent gains

Jan 8, 2018 at 10:27 AM
facebook twitter linkedin

Retailers have been releasing holiday sales data over the past week. While recent results from the likes of Macy's (NYSE:M) and L Brands (NYSE:LB) sent the retail stocks tumbling, Kohl's Corporation (NYSE:KSS) and Lululemon Athletica Inc. (NASDAQ:LULU) are trading higher after the department store chain and yoga apparel maker both reported upbeat numbers for the November-December period. Here's a closer look at how shares of KSS and LULU are reacting.

Kohl's Boosts Full-Year Profit Forecast

KSS stock is up 6.3% to trade at $57.77, earlier hitting a new 12-month high of $59.09,  after the retailer said same-store sales for the holiday period jumped 6.9%. As such, Kohl's boosted its full-year profit guidance to a range of $4.10 to $4.20 per share from its previous estimate of $3.72 to $3.92 per share -- well above the consensus forecast for 2017 earnings per share (EPS) of $3.64.

The Amazon partner has been flying high in recent months, up 52% since taking a sharp bounce off its formerly resistant 200-day moving average in early November. This upside has come amid intense selling pressure from shorts, with short interest up 5.2% in the most recent reporting period to 30.86 million shares -- representing 18.3% of the stock's available float, or 7.2 times the average daily pace of trading.

This skepticism is seen elsewhere, too, per Kohl's stock's 10-day put/call volume ratio of 1.86 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) -- in the 75th annual percentile. KSS shares could get an additional boost, should some of the weaker bearish hands capitulate to its current momentum.

Lululemon Hikes 4Q Guidance

Lululemon raised its fourth-quarter profit and revenue forecasts, citing a strong holiday shopping season. The retailer said it now expects adjusted earnings of $1.25 to $1.27 per share on revenue of $905 to $915 million. This compares to a previous forecast for EPS of $1.19 to $1.22 on $870 to $885 million in revenue. Analysts, meanwhile, are calling for a quarterly profit of $1.22 per share on $883.8 million in sales.

In reaction, LULU hit a four-year high of $81.92 out of the gate, but has since swung 0.9% lower to trade at $78.75. More broadly, the shares have rallied 73% since bottoming near $47.25 in late May. This surge had the stock's 14-day Relative Strength Index (RSI) close at 72 last Friday -- in overbought territory -- which may explain today's reversal.

Analysts, meanwhile, yet to catch up to LULU's longer-term price action. Of the 24 brokerages covering the shares, 11 maintain a "hold" rating, while the average 12-month price target of $78.18 stands at a discount to Lululemon's current stock price. Should the stock resume its uptrend, a round of upgrades and/or price-target hikes could translate into bigger gains for LULU shares.


Minimize Risk While Maximizing Profits

There is no options strategy like this one, which consistently minimizes risk while maintaining maximum profits. Perfect for traders looking for ways to control risk, reduce losses, and increase the likelihood of success when trading calls and puts. The Schaeffer’s team has over 41 years of options trading success targeting +100% gains on every trade. Rest assured your losses are effectively limited to your initial cost at the time of making your move! Don't waste another second... join us right now before the next trade is released! 



Special Offers from Schaeffer's Trading Partners