Macy & # 39; s? It may be a good time to avoid adding new stores

Well? It depends

Maybe did you notice the April retail sales? They missed you, they were really awful. Go back, after April Industrial Production (also terrible), and voila! You found it. Hey, look at this. With overall retail sales printed at -0.2% on a month, even with retailers that are not in recessed stores (it's e-commerce.) This hardly ever happens. Department stores experienced a period of growth … + 0.7% m / m. This growth beat all other positions, with the exception of gasoline. Hmm. So bizzare.

Prior to that, Macy's (M) had gone on the band with the company's first quarter results. I have often traded this stock, with some success for pedestrians. Attracted like a moth to the flame by this gargantuan dividend yield. I watched Macy in New York the other day. I watched for a moment. Nobody enters. Nobody goes out. It must have been a bad day, as sales of compilations on a licensed and owned business improved by 0.7% for the quarter. Not a strong number for someone else. Better than expected for Macy's.

What is the title? Macy's beat expectations against adjusted EPS of 10 cents. Revenues were a bit low and declined from one year to the next. The gross margin was up to expectations, as was the operating profit, but both were down from last year.

What they said

The company is sticking to the full year forecast set out several months ago, in the hope that its EPS generating business figure for 2019 will reach between 3.05 and 3. $ 25. The company is still expecting its sales to reach a range of 0% to 1%. Do I buy the stock on this report? CEO Jeff Gennette seemed optimistic. "Brick and mortar sales grew sequentially in the first quarter, driven by Growth50 and Backstage, and we saw double digit growth in our digital business, and mobile continues to be our channel of choice. fastest growth. "

Balance sheet

Cash is down sequentially and annually. The claims are lower. Inventories are higher. In the books, it is an asset. Let's hope so. Long-term debt is low, which is positive. A $ 2.8 billion long-term lease liability has been disclosed that did not exist before. I really consider that the payment of dividends is the only reason an investor would want an equity participation under this name. Macy's is not going away from Amazon's e-commerce (AMZN) and even if they resort to discounting, they will not drive the consumer out of the working class. Walmart (WMT), Kohl's (KSS) and Target (TGT).

In my opinion, but with the trade war with China reaching incendiary levels, now may be a good time to avoid not only the addition of a new retail sector, but also to the coverage of existing positions that traders seek to maintain.

An optimistic trader could …. (in small lots)

– Buy a $ 22M call in August (value: $ 1.60)

and pay for it by …

– Sell an M in August (value: $ 1.46)

– Sell an M in August (value: $ 1.06)

Net credit: 0.92.

Basically, the trader receives $ 92 to take an updated risk. The actions go higher? The trader may exercise the right to pay US $ 22 in August (Q2 results are due in August). If the stock price were to fall over the next three months, the trader could buy the put options or pledge to pay $ 21 for 100 shares and $ 20 for a second cent. stocks are trading below $ 20.

(Amazon and Kohl are stakes in Jim Cramer's member club Action Alerts PLUS.) Do you want to be alerted before Jim Cramer buys or sells AMZN or KSS? know more now.)