Michael Kors (KORS) reports earnings on February 5th prior to the open. The options market is implying about an 8% one day move, which shockingly has been about the average move since the company reported its first results as a public company in 2012.
The stock’s ascent from its $20 ipo to its all time highs just above $100 early last year was fueled by sales growth that seemed to come at the expense of competitors like Coach (COH), but it recently hit a speed bump as the consensus estimates call for a deceleration in earnings and sales growth.
In the last year the stock has had a series of gaps on disappointing results and guidance, causing the stock to decline 30% from the all time highs:
Short dated options prices have risen as expected into next week’s results, at levels equivalent to the last few quarterly reports:
A quick look at open interest in KORS options shows the recent build up of short dated calls in February, with the three largest lines of open interest all Feb calls:
Despite KORS recent bounce off $65, the stock is still down 6% on the year, but options traders are looking up near term.
One thought is that in the current investment environment, companies with exposure to strong dollar that expect much of their growth from emerging markets are out of favor. As opposed to retailers like KORS with mostly North American exposure that benefit from lower crude without the headwind of strong dollar and heavily exposed to the one thing that is working in the global economy, the U.S. consumer.
We may take a shot from the long side on this but we first want to see what Coach (COH) has to say on its fiscal Q2 report tomorrow before the open. We’ll circle back around on this after that.