Guess Inc. (GES) appears to be back in style, as shares were up nearly 38% year to date in 2013.  GES stock is trading in a 52-week range of $24.07-$34.94, having logged the high of the year on November 20 (one week prior to Black Friday). 

The iconic LA-based clothing line is scheduled to report third quarter earnings following Wednesday’s session.  Consensus analyst estimates are projecting $0.38 EPS on revenue of $613.56 million, roughly a 2.5% decline from the same quarter one year prior. 

The tough U.S. consumer climate is only partially to blame; lower consumer spending in areas such as Southern Europe and China, traditionally beachheads for the brand, has hurt the company’s international sales figures.  Thus far, Wall Street appears to be nonplussed: the stock rallied 12.9% and 8.3% the past 2 quarters.  The stock has also rallied 3 of the past 4, and 7 of the past 8, quarters, with a mean move of 7.6%.  The near-term GES Dec at-the-money straddle is implying a move of about 9.2%.

As some of you may have noticed, I have a bullish bias.  Thus I will look to play GES to the long side with the Dec 36-37 Call Spread.

MY TRADE

Buy the GES Dec 36-37 Call Spread for $0.25
Risk: $25 per 1 Lot
Reward: $75 per 1 Lot
Break-even $36.25

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