Investors have liked the look of Men’s Wearhouse (MW) shares in 2013; the stock has outperformed the broader market handsomely, and shares are up nearly 63%.
MW stock is trading in a 52 week-range of $27.47-$52.72, having logged the high of the year on November 26, 3 days prior to Black Friday. The Houston-based men’s dress clothes retailer made headlines in June when it dismissed founder and Executive Chairman George Zimmer for undisclosed reasons. More recently, Men’s Wearhouse has been in the headlines for talks with rival Jos. A Bank Clothiers. Following a rejection of the latter’s $48 per share takeover offer, Men’s Wearhouse made a bid to acquire its smaller rival.
Men’s Wearhouse is scheduled to report Q3 Earnings after the close on Wednesday, with consensus analyst estimates pointing to $0.86 EPS on revenue of $627.14 million. The stock has moved an average of 12.5% the past 8 quarters on earnings, with mixed performance: shares have moved up 2 of the past 4 quarters, and 4 of the past 8. With 10 days left to expiration, the Dec at-the-money straddle is implying a move of around 7%.
MY TRADE
Buying the Dec 52.5-55 Call Spread for $0.70
Risk: $70 per 1 Lot
Reward: Up to $180 Per 1 Lot
Break-even: $53.20