Tim Horton's (THI) Hitting the Grinder
by Houghton and Atkeson 11/06/08
Tim Hortons Inc. (THI) is a quick service restaurant chain mostly based in Canada that sells premium coffee, cappuccinos, specialty teas, soups, sandwiches and fresh baked goods. In other words, it is just another retail company trying to attract consumers.
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If Timmy Horton's coffee is anything like Starbucks (SBUX), the future is more bleak than bright. We have also just witnessed one of the weakest retail same store sales reports seen in decades.
THI reports earnings tomorrow morning before the open.
In advance of the news, we are seeing a substantial put spread buyer of the THI Nov 25/22.50 (THIWE/THIWX) Puts more than 3,000 times.
The trade is larger than all of the open interest in both puts and calls in all expirations. It looks like another coffee retail house is about to hit the grinder.
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Looking into June, the market should begin refocusing on upcoming earnings reports for evidence the economy is gaining momentum.
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In the short-term, the government's bond auction is likely to be a key driver of stocks.
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The credit market, a reliable indicator of equity direction, suggests we will break out of the SPX's trading range to the upside.
The market seems to be saying that a 30% move up from the lows is ahead of the real economy and the market needs to allow the economy to catch up.
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