2 Stocks Selling Off After Earnings

Apparel retailers Tailored Brands and Oxford Industries reported disappointing results

by Josh Selway

Published on Dec 13, 2018 at 9:10 AM

The shares of apparel retailers Tailored Brands Inc (NYSE:TLRD) and Oxford Industries Inc (NYSE:OXM) are set for major losses today after the companies' quarterly reports. TLRD stock, for example, is on pace to sink a stunning 25.3% at the open, which would put it at a fresh 52-week low. The price weakness is a result of the Men's Wearhouse parent's disappointing third-quarter revenue and lowered full-year outlook.

Brokerage firm Jefferies responded to the results with a price-target cut to $31 from $40. The analyst in coverage suggested the stock could continue to struggle until Men's Wearhouse shows improvement. The firm is just one of two that are in coverage on TLRD. 

Looking elsewhere, it's possible Tailored Brands short sellers were seeking insurance in the form of call options ahead of the quarterly event. For starters, these bears control more than 23% of the float, equating to almost two weeks' worth of buying power, based on average daily trading volumes. Combining this data with TLRD's elevated 10-day call/put volume ratio of 6.47 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) would lead one to believe shorts were buying calls to hedge against an upside move.

The equity closed Wednesday at $20.14, slightly lower on a year-to-date basis, after recently moving below the support of the 320-day moving average. Looking back, the shares hit an annual high of $35.94 on May 14.

Moving on to OXM stock, its pre-market activity has it set for a 14.4% decline at the open, which would also have it at an annual low. The owner of Lilly Pulitzer came up short of analysts' expectations with both earnings and revenue for the third quarter. This technical weakness would be just more of the same from a security that hasn't traded above its 20-day moving average since Nov. 19, settling at $74.81 yesterday.

Analysts at D.A. Davidson and Telsey Advisory have already reacted, with the first firm downgrading Oxford Industries to "neutral" from "buy," while the latter cut its price target to $76 from $93. There's potential for more bear notes to come through and weigh on OXM shares going forward, since 80% of the analysts in coverage have "strong buy" recommendations.

As for options traders, there was an intense put-skew ahead of the event among those targeting contracts expiring within three months. This is according to the equity's Schaeffer's put/call open interest ratio (SOIR) of 5.57, ranking in the 100th percentile of its annual range.

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