Fill Up Your Bag with Three Retail Calls

By Linda McDonough • November 10, 2017

The Trades:

Buy to open the January 19, 2018 call on Williams Sonoma (NYSE: WSM) with a strike price of $52.5 at $2.00 or lower. Symbol (WSM180119C52.5)

Buy to open the January 19, 2018 call on Target (NYSE: TGT) with a strike price of $62.5 at $2.10 or lower. Symbol (TGT180119C62.5)

Buy to open the January 19, 2018 call on Dick’s Sporting Goods with a strike price of $27 at $1.90 or lower. Symbol (DKS180119C27)

The Rationale:

I’ve been eyeing these retailers for some time, waiting for the bears to push expectations down to beatable levels. The past four quarters have been nothing but difficult for retailers. Increased online competition and dismal foot traffic have left almost no retailer unscathed.

However, green shoots are starting to appear. After two years of record retail bankruptcies, the strong remaining merchandisers will likely do well.

Valuations are at cyclical lows and each one of these has shown the ability to grow revenue.

Each one of these companies will report earnings next week. I recommend purchasing these calls before the earnings releases.

The most critical piece of information to listen for on each of these calls is the trend in sales. Those retailers able to finally grow their sales, particularly same-store sales otherwise known as comp sales, should see their stocks rise.

Here’s the schedule:

Tuesday, Nov. 14: Dicks Sporting Goods (NYSE: DKS) 10:00 AM (EST)

Directions: A webcast will be available via the company’s website. In addition, the call can be accessed by dialing (877) 443-5743 (domestic callers) or (412) 902-6617 (international callers)

Wednesday, Nov. 15: Target Corp. (NYSE: TGT) 8:00 AM (EST)

Directions: A webcast will be available via the company’s website.

Thursday, Nov. 16: Williams-Sonoma (NYSE: WSM) 5:00 PM (EST)

Directions: A webcast will be available via the company’s website.

Stock Talk

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Derek: Las Vegas, NV

11/10/17 ‐ 2:18pm ET November 10, 2017 at 2:18pm ET

Options are extremely overpriced going into earnings, so I opened bull call spreads, which will offset the cost and give me a much lower breakeven point.

WSM Jan 19th BTO $50C STO $52.50C $1.13 Debit: Potential ROI 121%
TGT Jan 19th BTO $60C STO $62.50C $1.18 Debit: Potential ROI 111%
DKS Jan 19th BTO $26C STO $27C $.50 Debit: Potential ROI 100%

All filled except DKS, still waiting…

Update: DKS filled today 11/13/17

Derek

Rick

11/10/17 ‐ 2:45pm ET November 10, 2017 at 2:45pm ET

Nice play

Maria R

11/13/17 ‐ 4:01pm ET November 13, 2017 at 4:01pm ET

Hi Derek:
thanks for posting: a very good alternative.

MODERATOR: Lisa G

11/13/17 ‐ 4:37pm ET November 13, 2017 at 4:37pm ET

All 3 filled at recommended. WSM last Friday and the other 2 today.

Linda McDonough

11/14/17 ‐ 8:42am ET November 14, 2017 at 8:42am ET

Hello subscribers,

Dicks Sporting Goods (NYSE: DKS) reported a good quarter this morning with strong guidance for the fourth quarter but warned that higher expenses will pressure fiscal 2019 (January 2019 year end) numbers.

Sales were 3% higher than expected and earnings 15% higher. Normally this would be enough to get a very cheap stock moving higher but the 2019 guidance throws a curve ball into how the stock will react.

The company hosts a conference call at 10 AM this morning. I am waiting to get some clarity on how conservative management is being regarding 2019 numbers as all the metrics I follow looked solid for the current quarter.

More to come-
Best,
Linda

Linda McDonough

11/14/17 ‐ 1:41pm ET November 14, 2017 at 1:41pm ET

Hello subscribers,

Post the Dicks Sporting Goods conference call I suggest holding on to the call position. It’s incredibly frustrating that the company, for the first time EVER, chose to give 2019 guidance on the third quarter call. Absent the increased expenses next year, I am confident the stock would be up and we’d be cashing in on a nice profit.

Alas, that’s the way the market works. I applaud management’s honesty and foresight in planning from a position of strength. I think the company is making wise investments in private label products to drive traffic and improve profits.

I’m keeping a close eye on the calls but think we they will go higher as investors digest the news.

Best,
Linda

Derek: Las Vegas, NV

11/14/17 ‐ 2:07pm ET November 14, 2017 at 2:07pm ET

Rolled DKS to:

BTO Dec 15 $20 Put
STO Dec 15 $22 Put

Potential ROI: Breakeven

Derek

MODERATOR: Lisa G

11/15/17 ‐ 7:23am ET November 15, 2017 at 7:23am ET

Derek,

I don’t know if this is something you can check on, but I have noticed that I do not get emails on these Profit Catalyst Alerts most of the time. For example, I got an email for this alert, but the 3 that came out afterwards I never received. Outside of OFI and VT this is the only service that I want to make sure I get every alert at this time, as the others I just read but don’t trade. Is there anyone you can ask to look into the sporadic nature of this and why it is occurring? I noticed in my account that some of the services now have the ability to indicate whether you want text and/or email and text was unchecked on this service but was checked on OFI and VT but emails were checked on everything so I checked the text option for this service. Thanks for any help you might be able to give.

Lisa

Linda McDonough

11/15/17 ‐ 11:12am ET November 15, 2017 at 11:12am ET

Lisa,
I’ll forward your comments to our customer service group as well to help ensure you receive the text alerts.
Best,
Linda

MODERATOR: Lisa G

11/15/17 ‐ 2:43pm ET November 15, 2017 at 2:43pm ET

Linda,

Thanks for the reply. I am not allowed to have my phone in work so I much prefer reliable emails. From what I can tell your alerts can come out at any time so unless I am always trolling the website, emails are the only way I get a timely notification. But I realize that for most people, getting a timely text is more optimal. Thanks for trying!

Lisa

Derek: Las Vegas, NV

11/15/17 ‐ 3:10pm ET November 15, 2017 at 3:10pm ET

Hi Lisa,

I just verified everything on the back end and everything is setup correctly. Since Linda forwarded your message to customer service, they will be able to have IT track what’s happening with your emails. If you still have problems let me know…

Derek

Linda McDonough

11/15/17 ‐ 11:11am ET November 15, 2017 at 11:11am ET

Hello Subscribers-

I’m here with an update on Target (NYSE: TGT), who reported this morning.

In a deja vu kind of moment Target (NYSE: TGT) reported an above-forecast third quarter but guided to a lower than expected fourth quarter. Similar to Dicks Sporting Goods (NYSE: DKS) release yesterday, sales are humming along nicely but expenses will be higher than anticipated.

Obviously a super soft market today doesn’t help but I am surprised by the heavy selling in the stock. Investors are most surprised by management’s guidance on weak profit margins. Last year’s fourth quarter suffered from low profitability so the comparison is relatively easy for the company.

Akin to Dicks, the spending is primarily on beefing up the company’s online capabilities and delivery options. I do think management is being conservative and expect the stock to rebound as investors realize the strength in its revenue trends, the most critical component in driving earnings growth.

I recommend holding on to the January calls and I’ll keep you updated if my thinking changes.

Best,
Linda

Derek: Las Vegas, NV

11/15/17 ‐ 3:13pm ET November 15, 2017 at 3:13pm ET

One more to go, I’d be surprised if WSM doesn’t play out as anticipated.

Derek

Smith

11/15/17 ‐ 12:28pm ET November 15, 2017 at 12:28pm ET

All these trades filled as recommended. Hence with the down turn and time remaining, I am looking at selling calls to offset the debits for the time being. Perhaps look at next expiration bull put spreads to help with these negative positions. Any thoughts welcome.

Derek: Las Vegas, NV

11/15/17 ‐ 3:28pm ET November 15, 2017 at 3:28pm ET

Rolled TGT to:

BTO Dec (1st Week) $52 Put
STO Dec (1st Week) $53 Put

Potential ROI: Small Profit (Haven’t had time to figure out the exact % yet)

Derek

MODERATOR: Lisa G

11/30/17 ‐ 7:05am ET November 30, 2017 at 7:05am ET

TGT appears to be moving! Up to 61.68 at yesterday’s close. But with the jitters on the NASDAQ due to all the institutional selling and year end juggling of portfolios who knows if that will have a ripple effect elsewhere.

Linda McDonough

12/04/17 ‐ 10:32am ET December 4, 2017 at 10:32am ET

Lisa,
Yes- I am keeping a close eye on it. Our 62.5 calls expire in January and I am expecting some more good news over the holiday season to boost these to a profit. You will see a trade alert when I issue a sell on them.
Best,
Linda

Dave G.

12/02/17 ‐ 12:49pm ET December 2, 2017 at 12:49pm ET

Linda, Your current thinking on BGFV? Down 54% since March recommendation……BUY?

Linda McDonough

12/04/17 ‐ 10:34am ET December 4, 2017 at 10:34am ET

Dave,
To say I was early on the BGFV call is an understatement! The company had more exposure to sales of guns and ammunition than I had modeled in and suffered due to weak sales of these items. However, sales of basic sporting goods equipment and apparel seem to be improving. We had good news from Hibbett Sports (NSDQ: HIBB) recently, so I expect BGFV will benefit.
Best,
Linda

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