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**I asked Mark Sebastian's wife, Lauren of the Big Blonde Hair Blog (and professional shopper) to use her fashion industry experience and give us some retail picks as we head into same-store sales. Wall Street analysts do these types of channel checks all the time in the retail space and she is one of the top consultants in the sector. Many of her picks coincide with the content across TheStreet's premium suite of products. Like I have said multiple times in various media outlets, one of the most identifiable trading trends for 2012 is this is a stock picker's environment more so than we have seen in the past two years and the retail group is the perfect place to call out trades. Let's take a look at her ideas followed by Mark's options strategy.
Trade well, Jill, Editor of Options Profits**
Lauren: Many parts of the country are experiencing unseasonably warm weather this Spring. While this leaves many men excitedly asking "Can I get a 7am tee time", it leaves a lot of their female counterparts screaming "What am I going to wear?", fearful of having to pull Spring 2011's neutral's out of the closet instead of Spring 2012's bright bolds and pale pastels. So what's a girl to do? My advice -- Shop. Immediately. While this is often my solution, this time it looks like many people are on the same page.
Jill and Brian Sozzi from Real Money Pro did a quick review on trends and the impact of weather leading into Thursday when retailers report same-store sales. Let's take a quick look:
Women (and men) are hitting the stores earlier this season looking for items to replace the sweaters that they would normally still be sporting at this point, and mall traffic is up. Since it's the norm for stores to order their Spring items three to six months prior to their actual delivery (normally Spring clothing is received between the end of January and the end of March) some retailers are scrambling for earlier deliveries or "immediate" orders, thanks to mother nature.
And I don't necessarily see this "early shopping" causing a drought later in the season. Those who did shop ahead and are used to having to wait a few months to wear their new wardrobe very well may tire of their first Spring finds with the start of Summer, and feel the need to stock up with even more shopping. Those who didn't shop ahead are now scrambling to the mall to pick up items they didn't think they would need for months. In addition, warm weather brings on the social component of impromptu dinners on patios and other events that will certainly warrant a fabulous new dress.
One to watch this Spring is Michael Kors (KORS). Everything it is doing is right on trend from a fashion standpoint, if not ahead of the curve. This has been highlighted recently by the buzz regarding KORS bold neon dresses seen on the trendsetting Jennifer Lopez to increased sighting of their mid-priced handbags.
While I once noted an over abundance of Coach (COH) Cs on women's handbags, I am now noting the MK of KORS taking their place. I look at these two brands as being the place where the person who really wants to flash a designer label like Louis Vuitton, but doesn't have the bankroll, goes for a lower priced stand in, and I see KORS moving ahead in that department down the road.
KORS is building itself as a brand with everything from handbags to dresses, and covering multiple markets with its MICHAEL by Michael Kors line, featuring less expensive items for those that don't have deep enough pockets to afford the "regular" Michael Kors line with higher end items. You can get a $5,000 Michael Kors dress and you can get a MICHAEL by Michael Kors dress for under $100, and the same with its handbags. I feel that KORS designs are so strong on high end items that offering a lower end line won't effect the willingness of its luxury customer to shop its brand.
In addition, COH retailers include its own stores, Macy's (M), Bon-Ton (BONT), Nordstrom (JWN) and a few others, while KORS also is carried at higher end stores, such as Saks (SKS) and Neiman Marcus creating a luxury feel, even on lower priced items.
Take a lesson from Mother Nature, and your wife -- Don't be the last to buy, it will be like getting stuck with only snow pants in your closet on the first 90 degree day.
Mark: As someone who has learned not to cross my wife on retail stocks, I can't help but be bullish the Michael Kors IPO. KORS is not the most liquid option class in the world. In fact, it's tough to do anything long-term in the stock. But since KORS is a recent IPO, you never know when it might take off.
Trades: Sell to open KORS May 46 puts at $2.40 and buy to open KORS May 43 puts for $1.30. Net sell the 46/43 put spread at $1.10.
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