McDonald's (NYSE: MCD - option chain) shares are getting a lift today after the company reported an 8.5% boost in August same-store sales, helped by a better-than-expected jump in international sales. It seems like the financial crunch families could be feeling is being absorbed by moderately and higher priced chain restaurants, but the bargain fast-food joints are weathering the storm. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on MCD.

MCD opened this morning at $63.00. So far today the stock has hit a low of $62.99 and a high of $64.65. As of 12:40, MCD is trading at $64.17, up $1.75 (2.8%). The chart for MCD looks neutral and S&P gives MCD a 3 STARS (out of 5) hold ranking.

For a bullish hedged play on this stock, I would consider a December bull-put credit spread below the $55 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 9.9% return in just three and a half months as long as MCD is above $55 at December expiration. McDonald's would have to fall by more than 14% before we would start to lose money. Learn more about this type of trade here.

Abercrombie & Fitch (NYSE: ANF - option chain) shares are dropping sharply today after the company reported an 11% drop in August same-store sales when analysts had been expecting a 7.9% decrease. Last month, July sales disappointed investors and we pointed out a potential trade with an annualized return over 35%. That trade is still looking good for expiration in two weeks. Today, we have another similar trade idea if you missed out on the last one and still think this stock won't be rising too far in the coming months

This morning, ANF opened at $51.39. So far today the stock has hit a low of $50.87 and a high of $53.00. As of 12:00, ANF is trading at $51.29, down $3.42 (-6.2%). The chart for ANF looked slightly bullish before today and S&P gives ANF a positive 5 STARS (out of 5) strong buy ranking.

For a bearish hedged play on this stock, I would consider a November bear-call credit spread above the $65 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in eleven weeks as long as ANF is below $65 at November expiration. Abercrombie would have to rise by more than 25% before we would start to lose money. Learn more about this type of trade here.

ANF hasn't been above $35 since June and has shown resistance around $55 recently.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in ANF.

Reuters reports that Wal-Mart Stores (NYSE: WMT) saw its same-store sales grow by 3% in August -- almost double the 1.6% increase analysts were expecting. Reuters wrote that its "net sales in the month, ended August 29, rose 8.7 percent to $30.67 billion." Customers are rewarding Wal-Mart for sticking with its strategy of offering everyday low prices. As the middle class squeeze tightens its grip, investors are anticipating more such growth.

Tuesday night I taught a business school case written in the 1990s on Wal-Mart. The lesson of the case is that Wal-Mart understood that its customers wanted low prices and wide selection so it built a system for getting discounts from suppliers and keeping its shelves stocked with the items customers wanted to buy in each of its stores. But this system stopped working as well through much of the last seven years.

That's partially due to people borrowing against the rising value of their homes to shop at more upscale retailers. In the last year, however, more people have suffered as their incomes declined, the cost of food and fuel has hit record levels, and the value of their homes has plummeted. This middle-class squeeze pushes more and more people back to Wal-Mart since it provides the lowest prices on the items they need to keep their families functioning.

Investors have noticed -- driving its stock up 37% in the last year. As the economy worsens, Wal-Mart investors are likely to benefit -- its stock is up 1.1% in pre-market.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Wal-Mart securities.

Abercrombie & Fitch (NYSE: ANF - option chain) shares are tanking today after the company reported a 7 percent decline in same-store sales in July, much worse than the 1.4 percent decline expected by analysts. Apparently, suburban Moms and Dads decided that $100 jeans were not the correct place to spend their economic stimulus checks. Either that or they were finally turned off by the three-quarters naked models in the store windows. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on ANF.

This morning, ANF opened at $52.13. So far today the stock has hit a low of $49.55 and a high of $52.72. As of 12:50, ANF is trading at $49.55, down 6.18 (-11.1%). The chart for ANF looks bearish but S&P gives ANF a positive 5 STARS (out of 5) strong buy ranking.

For a bearish hedged play on this stock, I would consider a September bear-call credit spread above the $65 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 4.2% return in six weeks as long as ANF is below $65 at September expiration. Abercrombie would have to rise by more than 20% before we would start to lose money. Learn more about this type of trade here.

ANF hasn't been above $65 since late June and has shown resistance around $56 recently. This trade could be risky if the economy stages a rebound, but even if that happens, the position above could be protected by reluctant shoppers who still have lingering worries about their wallets.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in ANF.

Nordstrom (NYSE: JWN) shares are falling today after the company reported its June same-store sales fell 18.6 percent, hurt by a May sales event that cut into June sales. The numbers fell in line with analysts' estimates, but JWN also warned investors that its second-quarter earnings will likely fall on the low end or slightly below its 65 to 60 cents per-share forecast. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on JWN.

After hitting a one-year high of $53.47 in August, the stock hit a one-year low of $28.00 in January. This morning, JWN opened at $29.75. So far today the stock has hit a low of $27.69 and a high of $30.15. As of 12:10, JWN is trading at $28.90, down 2.34 (-7.5%). The chart for JWN looks neutral but deteriorating, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bearish hedged play on this stock, I would consider an August bear-call credit spread above the $35 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 6.4% return in five weeks as long as JWN is below $35 at August expiration. Nordstrom would have to rise by more than 20% before we would start to lose money. Learn more about this type of trade here.

JWN has been above $35 as recently as early June but has shown resistance around $32.50 recently. This trade could be risky if the company's earnings (due out on 8/14) are a positive surprise, but even if that happens, this position could be protected by resistance JWN might find at its 50-day moving average, which is currently around $34 and falling.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in JWN.

Chico's FAS (NYSE: CHS) shares are falling today after the company reported June same-store sales dropped 12.9 percent. While this was a slightly better result than the 14.2 percent drop expected by analysts, investors pushed CHS lower as that kind of a drop is not so good during a period when many consumers were receiving stimulus checks. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on CHS.

After hitting a one-year high of $25.10 last July, the stock hit a one-year low of $4.89 on Monday. This morning, CHS opened at $5.32. So far today the stock has hit a low of $5.10 and a high of $5.45. As of 12:05, CHS is trading at $5.28, down $0.04 (-0.8%). The chart for CHS looks bearish and steady, while S&P gives the stock a neutral 3 Stars (out of 5) hold rating.

For a bearish hedged play on this stock, I would consider a September bear-call credit spread above the $50 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in four and a half months as long as CHS is below $7.50 at November expiration. CHS would have to rise by more than 40% before we would start to lose money. Learn more about this type of trade here.

The market is set for a lower open this morning, and one of the stocks that will be contributing to the slow start will be warehouse retailer Costco Wholesale Corp. (NASDAQ: COST) which is currently trading down slightly over 6% in today's pre-market action.

The company announced its fiscal Q1 earnings this morning and was unable to beat analyst estimates, despite an 11% increase in quarterly profit. For the entire quarter the company showed earnings per share of 59 cents, which was in-line with what analysts had been expecting to see going into today's report.

Despite not being able to outpace analyst estimates for earnings, the company had a pretty good quarter overall. If you take a look at revenues, you see a very respectable jump of 12% in the quarter, which is a great increase, but once again, in-line with analyst estimates.

Wal-Mart (NYSE: WMT)'s same-store sales for the latest period were weak.

U.S. revenue rose 5% for October hitting $17.4 billion. International was the star, moving up 19% to $7.2 billion. Total revenue moved up 8%.

In the U.S., same-store sales for the Wal-Mart brand were flat for the period. Sam's Club same-store figures rose 2.7%.

The hopes for a holiday turnaround at the world's largest retailer just got a set-back.

Douglas A. McIntyre is an editor at 247wallst.com.

Wal-Mart (NYSE: WMT) is reducing the amount of capital expenditures for 2007 in light of reduced expansion of the company's Supercenters in the domestic market as it attempts to eke out more sales from existing stores.

Well, as I've stated for over a year here at BloggingStocks, this is a strategy that the retailer was forced to take. It's already saturated many U.S. markets, and opening stores for the sake of opening them just won't cut it for growth any longer. The problem is that I still don't see the changes that will make sales growth happen in existing stores. Doug McIntyre even wrote about the retailer closing some stores about a year ago. What's in store for the retailer is anyone's guess at this point.

As a result, the world's largest retailer will cut its capex amount down in the range of $14.7 billion to $15.4 billion, down from a figure of $17 billion earlier in the year. Wal-Mart's chief administrative officer, John Menzer, stated that the retailer still has a goal to "beat" the $15.5 billion figure, however. With Wal-Mart's recent unwavering plan to continue opening stores in the face of declining same-store sales at existing locations, this admission was a bit overdue, to put it mildly.

The retailer also reiterated capex plans for fiscal years 2009 and 2010, saying it would spend $13.5 billion to $15.2 billion each year. Along with that, the retailer expects square footage growth (new stores, in other words) to come in at 6% for the current fiscal year, with a 5% to 6% figure for the 2009 and 2010 fiscal years as well.

Staples Inc (NASDAQ: SPLS), the office supply retailer that proved to be a great forecaster of the 2002 economic recovery, reported a 2% drop in same-store sales yesterday, down from 4% positive comps last year. Staples' results might portend a weakening U.S. economy.

However, Saks Inc (NYSE: SKS), the long-time struggling retailer, reported same-store growth of 13.2%. Who would have thought? Stephen Sadove, chairman and CEO of Saks, said figures indicate that "our customers are responding to our focused merchandise assortments as well as our customer service and marketing initiatives. We expanded our gross margin rate by 270 basis points for the quarter primarily as a result of reduced markdowns." Those are pretty spectacular results for the old-line retailer.

What should investors conclude? Staples is likely giving a better insight into what is going on in the U.S. economy. The office-supply retailer sells to many cross-sections of the economy -- both to business, and, more importantly this time of the year, to the back-to-school consumer.

Staples reduced estimates for the remainder of the year suggesting back to school will be lite. Start following this retailer again, it is a very good leading indicator of economic activity, providing some foresight as to when this economic slowdown will be over.

Hot Topic Inc. (NASDAQ: HOTT) reported better than expected same store sales last night, down only 4% versus a consensus decline of 6.7%.

The company, which sells alternative music and pop culture apparel and merchandise to teens, has cut back on promotional activity with inventories becoming more lean, a positive for future quarter performance. Further, its new story formats continue to do well and trends at Torrid remain solid.

We blogged earlier in the week that Hot Topic may be setting the foundation for a meaningful turnaround later this year and going into 2008. The stock is way off from its $30 high and is now at $11. SAC Capital has accumulated 5.1% of Hot Topic stock, or 2.3 million shares, up from the 245K shares it had disclosed at the end of the first quarter.

Hot Topic, with movies like the Transformers and a new generation of video game consoles and games coming to market, will have ample supply of trendy new products to sell and support a nice turnaround. The stock is up 49 cents in trading today.

Hot Topic Inc (NASDAQ: HOTT), the specialty retailer that operates the Hot Topic and Torrid concepts, might be worth a look. The stock is way off from its $30 high and is now selling for $11, and its poor operating performance could be bottoming.

While same-store sales continued to slide in May, down 6.1%, margins for the retailer are beginning to improve. Also, SAC Capital has racked up 5.1% of Hot Topic stock, or 2.3 million shares up from the 245K shares it had disclosed at the end of the first quarter.

With bad inventory out the door and movies like the Transformers and a whole new generation of video game consoles and games coming to market, this trendy retailer stock could be ready for a nice turnaround.

Best Buy Co Inc (NYSE: BBY), Circuit City Stores Inc (NYSE: CC) and Wendy's International Inc (NYSE: WEN) have all warned of or reported light results during the past few days, a sign that the consumer is slowing down.

• Best Buy reported a drop in gross margins, as promotions for higher-end flat panel TVs kick in. Same store sale comps came in at a positive 3% and the company is guiding to 2% to 2.5% growth.
• Circuit City warned last quarter that business was deteriorating, with its stock getting hit hard.
• Wendy's reported a 3% drop in same store sales and a big miss on its EBITDA line.

Do not expect much of an uptick in consumer spending until the Fed starts dropping rates. Consumer dependency on home equity loans to finance large purchases is over, making year-over-year comparisons hard for the retail industry.

In a sign that May may have been a good month for big-box retailers, same-stores sales at Costco (NASDAQ: COST) rose 7%. A Reuters poll suggested analysts had forecast an increase of just over 5% for the chain. Costco's total sales rose 11 percent to $5.14 billion.

Costco has been no more successful than other mega-retailers including Wal-Mart (NYSE: WMT). COST shares are up from $47 last September to their current price of just below $56. For the last year, the stock is up less than 10% as is Wal-Mart. But Target's (NYSE: TGT) shares are up 30% over the same period.

Results of Costco's last quarter were hurt by customers returning merchandise. Revenue rose 10% to $14.66 billion, less than Wall St. expected. Earnings fell 5% to $224.

The improvement in same-store sales in May should be an indication that the current quarter may have some upside.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Home Depot Inc (NYSE: HD) reported awful results with same store-sales crashing between 15% to 20% in the Northeast and certain regions in the South -- the areas most affected by the drop in new home construction and remodeling. Margins were also on the light side as new management has decided to re-invest in its employees.

Home Depot pointed out during the conference call that more downside could be on the way. Private residential investment, which was fueled by home equity loans and the refinancing boom, peaked in 2005 at 6.5% of GDP and is now down 5%. However, the norm is 4%. Therefore, management used this stat to suggest any recovery for Home Depot will be pushed out until 2008.

Home Depot also discussed the need to invest in its employees. That is a euphemism for paying higher wages. It did not take much reading between the lines to conclude that tension between Home Depot store-level employees and super-highly-paid former CEO Bob Nardelli hit a crescendo over compensation. Under Nardelli, organic sales growth slowed while return on capital expanded which means employees got squeezed.

Two other points of note during the call -- lumber prices hit a five-year low and the worst of the housing downturn is in Florida and Boston.

Investors should continue to build a position in Home Depot's stock. When considering a 15% to 20% drop in same-store sales in certain regions of the US and the stock was only down $1.00 during trading, it is a sign that most of the sellers are gone. Further, the new management team appears to making fundamentally sound changes to the home retailer. My advice is to buy and be patient.