Safety in retail stocks??? (wtf is going on!)

Three strange things happening today.

1.) Put interest in ETFs is an all-time high and the bears are winning with $SPY down 0.88% today giving back all of the gains from the past month.

2.) Tech names like $NVDA, $GOOG, $TSLA along with crypto $BTC -3.42% and $ETH -3.69% are all getting walloped

3.) There’s unusual strength (albeit temporary?) in retail names we forgot existed and are confused people actually shop there while luxury names are getting destroyed.

Remember it’s not about the gains we made but the Louis Vuitton handbags we picked up along the way.

Let’s dive in.

America’s Resilient Retail

Markets are weird and suburban moms are apparently spending like there’s no tomorrow.

Check out these retail names ripping:

Urban Outfitters $URBN - 15.45%

Abercrombie & Fitch $ANF - 26.18%

Kohl’s $KSS - 9.24%

First quarter earnings were up, same store sales were up and guidance was raised.

Urban and Abercrombie are both near their 52-week highs posting over 20% returns this year while the Kohl’s recovery story continues to improve.

Let’s cut the Kohl’s and look at Urban and Abercrombie. Their customer mix is pretty similar, basically 80/20 female to male in the young adult of 16 - 28 demo.

Look at these numbers and see if you notice a trend…

Abercrombie sales up 14%

Free People sales up 17%

Anthropologie sales up 13%

Urban Outfitters sales down -13%

Hollister sales down 7%

See anything?

Maybe this will help.

It looks like the inclusive we’re all in this together style created by marketers to cater to the tiktok zoomer scum is bleeding out as shoppers opt-in for mainstream hipster or Free People’s bohemian chic as means for self-identification.

[ abercrombie earnings ]

Or maybe they’re trading down from European luxury…

The American market is big tech. Europe has fashion. They both have been on a too-big-to-fail tear this year, but maybe that’s ending now. Ultimately the winning country will be the one that also has assault rifles, big trucks and air conditioning (🇺🇸 🇺🇸 🇺🇸).

European fashion houses fell dramatically this week including major names like Vuitton Moet Hennessy, Hermes, Christian Dior, and Kering which we unfortunately still own and never sold and felt like geniuses when they were 10% higher on the assumption that AI will not disrupt the handbag and Gucci belt space.

Three primary reasons:

1.) Gravity

The fashion houses were trading at 36x PE vs the rest of the Stoxx 600 at 12x. All things correct over time.

America (Apple, Microsoft, Google, Amazon, Nvidia, Meta, Tesla) is 30x vs 17x for the S&P 500.

2.) The China Reopening Boom was more like a wet fart

Asia excluding Japan was 30% of $LMVH’s sales in 2022.

China is also seeing a resurgence of a covid strain called XBB which sent $MRNA up 10% yesterday.

3.) “Weakness in the aspirational consumer”

Morgan Stanley analyst Edouard Aubin flagged a “relatively more subdued performance in the US and China” while Burberry is seeing demand for entry-level products softening among younger Americans.

[ zh ]

RIGD REPORTS on $SPY

Whoa baby two red days in a row - maybe the debt ceiling standoff will finally be the event that flips the 0dte mania from calls to puts.

Check out this chart

Holding a 0DTE to expiry sounds insane to us, but it appears at the money calls has been a winning strategy since the market bottomed last year.

If we stop trending up, maybe that begins to flip as we see end of the day dips instead of rallies.

While the moves have seemed substantial to the up and downside, we’re back to flat on the month for $SPY so still very much in range.

Kingmaker NVDA reports after the close today and we saw two massive trades opened.

Bear Put Spread 9:38am

Buy 302.5p 1839 contracts for 1.86m
Sell 300p 1839 contracts for 1.62m

This trade is positioned for a moderate move lower.

Bull Call Spread 10:57am

Buy 312.5c 6317 contracts for 3.47m
Sell 335c 11051 contracts for 1.71m

This trade is positioned for a moderate move higher.

The options market is pricing in a 5.5% move so ± $16.50.

A full move to the downside would profit 63% for the bear side, while a full move to the upside would profit 72.9%.

Which way western man?

thanks for reading THE REPORT by RIGD AI

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