NEW DIRECTIONAL PUT PLAYS

Coach, Inc. - COH - close: 33.70 change: -0.86

Stop Loss: TBD
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 4.8 million
Entry on August 04 at $---.--
Listed on August 02, 2014
Time Frame: 8 to 12 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
Coach started in a Manhattan loft back in 1941. Their focus on high-quality leather goods has expanded to handbags, men's bags, women's and men's small leather goods, footwear, outerwear, watches, weekend and travel accessories, scarves, sunwear, fragrance, jewelry and related accessories. As of last year COH had almost 1,000 stores with more than 500 in North America and more than 400 in Asia.

It used to be that COH was the big brand in luxury items. It seemed like they could do no wrong with strong growth. It appears they out grew their exclusivity. It did not help that rival Michael Kors (KORS) was beginning to hits its stride and steal the spotlight from Coach.

It has been a tough year for retail companies. 2014 started with a very harsh winter that kept consumers indoors. COH was not immune to this effect. However, normal retailers could lay blame at the rising cost of gasoline or food items. That shouldn't apply to COH, which was always seen as a retailer to the higher-end consumer.

Desperate to stop the slide in sales COH resorted to promotions and discounts. This seemed to backfire. While the promotions may have increased foot traffic in their stores it helped sully their appearance as a luxury brand. Today COH is trying to turn things around. They're going to revamp their stores and go back to full luxury pricing. This could be expensive and pressure their margins as they try to turn things around.

COH held an investor day on June 19th. They told analysts that Coach would close 70 underperforming stores in North America as part of the turnaround plan. Most analysts leaving the meeting with COH turned bearish. In the three weeks following the analyst day shares of COH were downgraded six times.

If you look at chart of COH you'll see big drops in January and April. Both of those declines were sparked by disappointing earnings news and guidance. The recent plunge in mid June was a reaction to the investor day mentioned above. Today COH is poised to hit multi-year lows.

COH's rival Michael Kors (KORS) reports earnings on Monday morning, August 4th. COH will report earnings on August 5th. We suspect that COH will disappoint yet again. However, there is a risk that expectations are so bad that COH could rally on earnings that are bad but not as bad as expected. I would consider this a more aggressive trade.

The idea here is to hold over COH's earnings report on Tuesday morning. That means if you can stomach the risk for this trade our entry point is Monday. It's up to you if you want to jump in on Monday morning or Monday at the close.

Aggressive traders may want to buy August puts, which expire in two weeks. We're listing the September puts below.

NOTE: I am not listing a stop loss tonight but as an aggressive trade I would use a wide stop. COH could be volatile this week.

*Buy puts on Monday morning*

- Suggested Positions -

Buy the Sep $33 put (COH140920C33) current ask $1.45

Option Format: symbol-year-month-day-call-strike

Annotated Chart:

Weekly Chart:


PVH Corp. - PVH - close: 107.99 change: -2.19

Stop Loss: 112.55
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 821 thousand
Entry on August -- at $---.--
Listed on August 02, 2014
Time Frame: 4 to 6 weeks, exit ahead of earnings in mid September
New Positions: Yes, see below

Company Description

Why We Like It:
PVH is one of the largest apparel companies in the world. They purchased the Calvin Klein brand in 2003. In 2010 they added Tommy Hilfiger to their portfolio. Last year they purchased the Warnaco Group. PVH is also know for its Van Heusen, IZOD, ARROW, Speedo, Warner's and Olga brands. PVH started in 1881 and has grow into clothing powerhouse with sales topping $8 billion a year across North America, Europe, Asia and Latin America.

The stock has delivered an amazing performance from its 2009 lows near $15.00 to January 2014 high of $137.00 a share. Unfortunately for investors the momentum has reversed. Technically shares have formed a massive head-and-shoulders bearish top over the last several months (see weekly chart below).

Consumer spending patterns have changed this year. Consumers seem to be saving up and purchasing big ticket items like cars and spending less on apparel. PVH has been working hard to overcome the tough environment. During the previous quarter PVH managed to show revenue growth but profits are getting squeezed. That's like due to the increasingly promotional retail environment. The big drop in early June was a reaction to PVH's earnings where they missed the bottom line estimate by two cents and management guided lower.

The stock's recent bounce just failed at resistance near $115 and its 20 & 30-dma. Now PVH is breaking support near $110. The Point & Figure chart looks pretty ugly and currently projects an $82 target.

I am suggesting bearish positions now at current levels. We are not setting an exit target tonight but we'll most likely exit prior to PVH's next earnings report in mid September.

*buy puts now at current levels*

- Suggested Positions -

Buy the Sep $105 PUT (PVH140920P105) current ask $3.20

Option Format: symbol-year-month-day-call-strike

Annotated Chart:

Weekly Chart:

Point & Figure Chart: