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Refreshing My Tactical Strategy
Originally published Nov. 8 at 7:59 a.m. EDTOver the past several days, I have made several quick, tactical moves that I would like to recount and briefly explain.
As most are aware, I had been net short for some time, but last week (about midweek) I covered all of my index shorts into the seventh and eighth consecutive down days for the S&P 500.
On Thursday and Friday I began to accumulate a long position (for rental, trading purposes). As stocks faded on Friday I expanded that long position.
I did this in the belief that we faced a likely Clinton victory, negative investor sentiment had grown extreme, and we were deeply oversold. Furthermore, I expected a 30- to 60-handle rally in the S&P.
I start the day with a small net short exposure.
While I have no view on the next 10 to 15 S&P points, looking out over the next six to nine months I remain negative in my market view.
- Average unit retail up 3.5% in 3Q.
- Gross margin flat Y/Y 39.8%.
- Comparable inventory down about 3%.
- SG&A up 5.2% Y/Y related to lower asset sales gains this year.
- May repurchase debt to improve its credit ratios.
- Currently above its targeted debt-to-EBITDA ratio of 2.5 to 2.8.
- Signed a contract to sell Union Square building (New York City) for about $250 million, expects transaction to close in January.
- Will be leasing the men's building back for two to three as it completes this construction.
- Will book the about $235 million gain in January 2018.
- Company also exploring options for downtown Minneapolis, Chicago and Herald Square in Manhattan.
- Signed a contract to sell its downtown Portland property.
- Transaction expected to close during 4Q w/ proceeds of about $54 million and the book gain of about $36 million.
- Additionally, company sold give locations to General Growth Properties (GGP) for a total of $48 million last week.
- In total, company has closed or announced plans to close eight stores as part of the 100 stores discussed last quarter.
- Expects comps on an owned-plus-licensed basis to be down about 2% to 0.5% in 4Q.
- Expects at least a 100-basis-point improvement in the gross margin rate for 4Q.
- Sees daylight in its Brooklyn construction, and as a result the timing for booking the gain is getting delayed more into 2017.
- Still tracking to its guidance for capital expenditures of about $900 million.
Finally, I have sold my S&P futures purchased slightly after midnight (essentially taking off my Index short exposure) into the schmeissing at it appeared that Trump was going to win the election.
I am in market-neutral mode (and at "sleeping levels") with a very low gross exposure.