Williams-Sonoma (WSM) Earnings Takeaways & Nike (NKE) Preview

0:00We're back on Morning Trade Live. William Sonoma moved obviously higher in Wednesday trade after a bottom line fourth quarter earning speed and largely in line guidance. The stock has struggled over the last month down more than 15% since hitting its all-time high on February the 20th. So let's go inside out on specialty retail and the state of the consumer joining us now is Christina Fernandez, the managing director and senior research analyst at Tellsley Advisory Group. Christina, thanks so much for joining us. I just took us through what worked here for William Sonoma given of course the reaction we saw yesterday post earnings. Of course they reported the fourth quarter I mean they're a retailer that does a lot during the holiday you know their comms were positive 3% which is you know a good number for home furnishings is definitely a category that consumers are starting to come back to spending but not you know in big ways after the pandemic so a 3% calm that they've done that consistently for five quarters it's good and their profitability was down year over year but it

1:01was still better than expected and for the year they had a you know pretty high 18% you know over 18% margin so so that was the good news and three out of the four brands did well particularly the namesake William Sonoma where consumers are still spending a lot in kitchen and retaining West Elm pottery barn kids so you know a lot of good things from like adversionizing perspective and then as it relates to the guidance for the for 2026 you know the housing markets still struggle but they guided to comms 2 to 6% so that's a solid number and the operating margin to be flat to slightly down even with a pretty big impact from tariffs so they're managing those cost pressures well so I think overall it was you know a good quarter and you know the guidance can give confidence that they can continue to grow through the year yeah and I guess that reflected in the stock reaction yesterday I mean it's a bit of a

2:01head scratcher that you know they're obviously up against so many challenges as you mentioned with of course towers and then the consumer spending patterns I mean this housing market we've got more data out this morning which didn't look great as well so let's see it seems like there seem to be a positive reaction of course to what they're saying with respect to the outlook here I do want to switch gears quite abruptly actually to Nike because I know that is a company that you follow very closely as well as far as the consumer because that's going to be the really the next big test as we hear from that company later in the barns you've had a couple of price targets lowered this morning from the sell side analyst community just talk us through what you're expecting here yeah with Nike so yeah it's going to be an interesting quarter will be put syntax you know the last quarter they reported in December was a bit disappointing they're making progress as far as their sales growth is moving in the right direction but last quarter was still flat they had talked about this quarter being up you know low single

3:01digits so you know growing but the rate of progress has been a little bit slow a couple of things we want to hear is one how with North America doing that's been their best region but a lot of it has been due to wholesale expansion so want to see how that continues to go and whether they're DTC business their own e-commerce that's been down double digit can improve they've done a really good job with the running product that's new want to see how that continues to perform and whether there are other categories whether doing better whether it's training basketball you know a lot of Nike going forward is going to be about the newness they bring to the market and how the consumers react to that so that's innovations really a key topic and then globally one of this reprises last quarter was the weakness in China China's definitely been a challenging market for them and more than expected so how they can take what they've done in the US so far about cleaning up the marketplace bringing more newness and and take that to other regions because last quarter outside of

4:03the North America all the regions were negative so so China is going to be in particular focus and then and then also Europe and Asia so I think you know we'll see it probably going to be some positive and negative I think we'll see progress in innovation in North America but still you know expect a mixed result coming out of this next quarter for Nike yeah and you just wonder of course what we heard from Lulu Lemon if some of its pain in particularly the North American market is Nike's gain I mean in some categories I know that they don't compete obviously directly across everything that they are selling here but you know obviously things are holding up pretty well internationally for Lulu but as you say Nike's been facing a couple of headwinds in places like China just very quickly what is the key metric to look out for here I know you mentioned obviously comp sales innovation is going to be key is it going to be more about the progress on that turn around more than the numbers do you think Christina yeah I think it obviously you know we have to pay attention to the

5:05numbers but it's going to be a lot about the next quarter guidance and then also about what CEO Elliott Hill says about the updated strategy and what the company's doing going forward I mean everyone knows they're still like in the middle of the turnaround so a lot of it is what can happen in the next you know year two. Gotcha thank you so much for the setup ahead of Nike's earnings that later this month and of course William Sonoma as well Christina Fernandez the managing director and researcher analyst over it tells you advisory group appreciated let's trade Nike now with Tom White host of fast market Tom obviously we've been tracking this turnaround plan we want to see progress on this we've got a couple of clues from other retailers of course this season but just walk us through an example trade on this name yeah bars really low going into this report Sam not unexpectedly Elliott Hill trying to reinvigorate the brand a little bit I think there's been a lot of divergence between overseas sales as

6:06opposed to domestically which started to perk up a little bit but yeah you know you take a look at earnings on the 31st that's going to be a key thing the world cup this summer that might provide a little bit of lift but we've seen some price target cuts recently so I looked at a strategy that takes advantage of yield in the stock the with the stock falling so much that yield on the stock is about 3.1 percent so that continues to grow as a stock falls as long as that dividend continues to get paid I looked at a cover call strategy where you can own the shares right collect that dividend yield that it pays out on a quarterly basis but then also creates a yield by selling it out of the money calls so I went out to the April monthly options here so 29 days to expiration you're going to get that earnings event within this for every 100 shares a stock you buy you selling out of the money call I looked at selling the April 17th monthly options the 57 and a half strike calls you're going to pay roughly about a 5170 debit for the strategy so you're buying the shares

7:08at a discount because you sold the out of the money call now it does cap some of your gains if you pay 5170 debit that's going to be your break even to the downside also because you own the shares you got 29 days in this trade as you get closer to expiration you can start rolling or adjusting that short call if you want to keep your shares but there's some profitability to the upside on this one if the stock does continue to rally where you can just take your profits and look for another opportunity but this is high capital because you're buying the shares but it also creates yields on both sides of the trade one because you own the shares and two because you're selling out of the money calls against your long stock with the expectation take at least consolidates maybe goes up a little bit where you can start adjusting those short calls and creating credits all right a good look at Nike today an example trade for us ahead of of course it's earnings are later in the month it of course we'll be reporting in the next couple of weeks so we're watching for that turn around plan and any progress they're coming from Elliott Hill and Co. thanks so much

8:11for the example trade for us this morning Tom Whiter we are looking at stocks that are selling off right now across the board you