M
Consumer spending is the chief concern for retailers, but the market is mixed. Home Depot (HD) and Walmart (WMT) are continuing to post gains while Target (TGT) slides due to inventory surplus on clothing and high-ticket items. Macy’s hasn’t missed a beat since the 2020 lows, recovering more than 30% of its previous share price. We don’t know where the price will be early next year but using custom options strategies, we can define an outcome that has downside protection with upside up to 25% with a gain multiplier of 1.4x on the way up.
Defined Outcome: Make up to 25.1% (46.7% annualized), M can fall 24% before you start to lose.
Buy 1 $21 call
Sell 1 $24 call
Sell 1 $16 put
Exp 3/17/23
Pros
• Beat earnings consensus estimates for last 11 quarters
• Price above the monthly 20 period moving average after back to school and going into holiday season
• Starting to open Toys “R” Us shops in flagship locations
Cons
• Inflation concerns for spending
• Most analysts are giving it a hold rating