Inflation is hurting discount retailers
The retail sector has been in focus over the past week, with several big names hitting up the earnings confessional. Best Buy Co Inc (NYSE:BBY), Burlington Stores Inc (NYSE:BURL), and Dollar Tree Inc (NASDAQ:DLTR) are among the retailers making headlines today, and below we will further explore what is driving their price action.
BBY Brushes Off Revenue Miss
BBY is up 2.3% at $70.72 at last check, after the tech retailer delivered a first-quarter earnings beat, though revenue missed estimates. The company said weaker demand stemming from high inflation should ease by the end of the year. Despite bouncing off yesterday's 2023 low of $68.45, shares are still facing pressure at their 20-day moving average, and are 12.2% lower in 2023.
Options volume is today running at five times the intraday average, with 13,000 calls and 19,000 puts exchanged so far today. The most popular contract by far is the June 67.50 put.
BURL Eyeing 4th Loss in 5 Sessions
Burlington stock was last seen down 2.7% at $162.29, following the department store's top- and bottom-line miss for the first quarter. The shares earlier slipped to $159.59 their lowest level so far this year, and are on track to mark their fourth daily loss in five sessions. Over the last three months, BURL has shed 26.5%.
It's worthy noting the security's Schaeffer's Volatility Scorecard (SVS) ranks at a 92 out of 100, meaning it has exceeded option traders' volatility expectations during the past year.
Fresh 1-Year Low for DLTR
A first-quarter earnings miss is also weighing on Dollar Tree stock, which is down 9.5% at $140.53 at last check. The discount retailer cut its 2023 profit forecast to boot, amid cooling demand for higher-margin discretionary goods. The security earlier hit a fresh one-year low of $129.25, and is looking to close below the 80-day moving average for the first time since April, as well as notch its worst single-day percentage drop since August 2022.
Options traders are chiming in, with 24,000 calls and 27,000 puts trades so far, or eight times the volume that is typically seen at this point. Positions are currently being opened at both the August 125 put and 150 call, which are also the two most popular contracts.