JWN Q2 Preview and Thoughts

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The$46-$48rangeistheclearsupport,with$57。

5,thisyearshigh,asnaturalresistance。

Fundamentals/Valuation?

Thisisa17P/Enamewitha2%dividendyield,withforwardearningsgrowthprojectionsof10-15%overthenext2years?

Itisapurelydomesticretailer,getting100%ofitsrevenuesfromtheU。

S?

Thisisapureplay,high-endAmericandepartmentstore,operating231storesin31states。

Consensusearningsestimateis0。

74,withaconsensusrevenueestimateof$3。

01bln?

WhenthecompanymissedestimatesinMay,andguidedlower,itdidsaythatitexpected2ndhalfgrossmarginstoimproverelativetothe1sthalfoftheyear,sothereissomeexpectationofimprovementhere。

Volatility?

AugustATMoptionsareabout40vol,whichishighforrecentmonths,butlowforsomeofthecrazinessthestockhasshowninthepastfewyears。

Heresalookatvolinthestockthepast2years:

Theredlineisimpliedvolacrossallmonths,bluetheactualvolofthestock,andyellowtheyearlyaverageofimpliedvol。

Thisstockiscapableofbigupwardswingsinvolduringuncertaintimes,andthenlowvolduringrallies。

TheATMstraddleinAugustisabout2。

65at40vol。

Dependingonthemoveinthestock,thatislikelytodrop10-15pointstomorrowmorning。

SeptemberATMvolis30andwouldlikelyonlyfallintothemid20sfollowingearnings。

MYVIEW?

BasedoncommentaryfromabroadswathofconsumerproductscompaniesintheU。

S。

itshardtoseeJWNdeliveringablowoutquarter?

However,theyarefacingtheirownloweredexpectationsafterloweredguidanceinMay,andthesamestoresalesnumberonAugust2ndwasbetterthanexpected,indicatingsomeimprovementoverthecourseofthesummer?

Butitshardtoseethisstockbreakingoutontheupsidegiventhetepidoverallbackdrop?

Withthestockonly4%from5yearhighs,therisk/rewardseemsespeciallytiltedtothedownside。