Lululemon Athletica inc. (LULU) is a designer and retailer of technical athletic apparel operating primarily in North America and Australia. LULU is currently trading around $43.72 in a 52 week range of $36.26 – 77.75. The company’s stock has been underperforming the market this year with shares declining 25.96% year to date.
For the quarter, LULU delivered a 13% increase in net revenue to $390.7 million as total comparable sales, which includes retail locations as well as online sales, were flat on a constant currency basis. Physical same-store sales dipped 5%, while comparable direct to consumer revenue rose 30% year-over-year. Net income for the quarter totaled $48.7 million, or an adjusted $0.33 per share, down from $56.5 million, or $0.39 per adjusted share in the year-ago period, while gross margin dipped 350 basis points to 50.5%. By comparison, Wall Street’s consensus expectation had called for $376.8 million in revenue and just $0.29 in EPS.
Lululemon also adjusted its full-year sales and earnings guidance. The company is now forecasting revenue of between $1.78 billion and $1.8 billion based on total comparable sales in the low-single-digits, and anticipates adjusted EPS will be in the $1.72 to $1.77 range. Both figures are in-line with current Wall Street forecasts.
We define unusual option activity as large block trades that represent a large percentage of daily option volume. The block trade is considered “unusual” if the option volume is above the average daily volume over the past 22 days. At KeeneOnTheMarket.com we scan and analyze order flow from all of the major options exchanges in order to identify any unusual option activity.
Analyzing unusual order flow gives traders a window into what the positions that large institutional players have. The majority of unusual option activity can be traced back to hedge funds, mutual funds, and other large institutions. Knowing where these institutions are placing their bets can be hugely advantageous for any trader. These institutions have informational and technological advantages that the average trader doesn’t have, and the amount of time and analysis that goes into every one of their trades is substantial. We offer this service through our 7 hour daily LIVE trading room http://bit.ly/135QWt8 or through Premium Twitter feed with all entries, exits, and unusual options activity tweeted all day long:http://bit.ly/11f0L9u.
Order flow can however at times be deceiving. One might logically thing that a large block buyer of calls is bullish on the underlying. This is not always the case. Remember that a large number of participants in the equity options market are hedgers. Long calls are a hedge against short stock, and long puts are a hedge against long stock. With this in mind we have developed a 7 step trading plan that helps filter out unusual option activity that will not provide actionable trade setups. It is by using this plan that we are able to identify the most significant unusual options activity trades every day.