The Blubber

(M) Macy’s blew analyst expectations out of the water this morning in theirQuarter 2 Earnings Reportreleased before market hours. With an adjusted Earnings per Share (EPS) of $1.29 for the second quarter, over 600% higher than the $0.19 EPS expected by market analysts. Macy’s also displayed strength in revenue, reporting $5.65 billion in revenue vs. the $5.05 billions expected, beating out predictions by just under 13%. In addition to these astounding earnings beats, Macy’s announced reinstatement of their regular quarterly dividend of $0.15 per share, and approved a $500 million stock buyback program. Investors certainly indicate their delight, as Macy’s stock price closed at $21.61, up 19.59% on the day.

Given this news, it comes as no surprise that options activity for Macy’s showed increased volume prior to earnings.

In the figure below, we can see that Macy’s experienced high options flow in the seven days leading up to the report. Even on August 12th, where Macy’s saw its stock price fall by a factor of nearly 5%, call volume held strong at 76,404 versus 22,557 in put volume. This shows strong faith in a rebound by the stock. The following days maintained this bullish sentiment to varying degrees, closing out the market day with 243,243 in call volume, compared to 41,095 in put volume.

On August 18th, the day before earnings, we observed a specific interest in the in-the-money $17 call strike expiring on 8/20 and 8/27, leaning heavily toward the bull side, including one buy-to-open order in excess of $486k in premium.

Amidst the flow and impressive earnings, Macy’s had one more surprise for everyone. According to aTwitter postby the company’s official Twitter account this morning, Macy’s announced it is reviving nationally beloved Toys ‘R Us chain. The famous toy chain, who announced the closure of their last two U.S. stores due to hardship during the COVID-19 pandemic, will find itself in 400 of Macy’s stores across the country.