Investors are hoping that the falling prices of gasoline will encourage more consumer spending for apparel and retail goods. The next two weeks are crucial because retailers will be issuing their fourth quarter earnings for 2014. This is the most active period of the year because it is the holiday shopping season. An industry conference which will be held at the ICR Exchange in Orlando, Florida will be a particular area of focus because analysts expect the companies that will be present at the conference to discuss business expectations for 2015 and to shine a light on the previous holiday sales.
Companies that will be present in the conference include Lululemon Athletica, Big Lots and Guess including a number of other retailers. There have been strong indications of strong December sales from retailers that include JC Penney Co, American Eagle Outfitters and Aeropostale although there is also indication that Macy’s has had disappointing sales. Commentaries from the conference are expected to provide more color on the prospects of the retail sector. However, in spite of its solid sales, JC Penney has announced some store closures while Wet Seal, a struggling apparel retailer said that it will laying off some 3,700 workers which means that there is a divergence of fortunes among retailing companies.
Dennis Dick who is the head of markets structure at Bright Trading LLC in Las Vegas says that people are betting on volatility and if money is moving in, they are betting on moves. The 30-day at-the-money implied that volatility for SPDR S&P retail exchange-traded fund (XRT.P) is a gauge of the risks of large moves in the ETF which is at 19% or higher than 90% of readings in the last 52 weeks. This data has been collected by Trade Alert, an options analyst.
In spite of the early upbeat results, investors remain wondering whether stocks have become overvalued. The sector feels like it is a bit outstretched and it is hard to assess whether the mainstream consumer actually believes that low gas prices will provide more sustained savings. With the retail ETF close to its all time high of $97.15 it seems that some are looking at the options markets as a way to protect against losses.