Food inflation is hitting the United States hard. Recent metrics show that food prices are 7.4% higher than they were this time last year.

Yet, rising prices haven’t changed buying habits. And it’s not because consumers don’t know what’s happening.

According to an in-house study performed by Walmart Inc (WMT), customers are fully aware of rising prices and inflation – they see it all around them, in stores and on the news – but they aren’t buying smaller packages or downgrading to store-brand products.

This is important because it’s affecting Walmart’s bottom line.

The Arkansas-based retail giant reported stronger-than-expected fourth-quarter earnings and record U.S. revenues – all while managing supply chain disruptions, wage pressures, and inflation.

For the quarter, adjusted earnings came in at $1.53 per share, rising 4.8% from the same period last year and just ahead of the Street consensus forecast of $1.50 per share.

Group revenues for the quarter were $152.9 billion, ahead of analysts’ estimates of $151.6 billion. On top of that, U.S. same-store sales rose 6.3% from the same period a year ago, topping $100 billion for the first time on record.

Those are solid numbers, so it’s no surprise shares jumped 4.01% in Thursday’s trading. On that day, the stock closed at $138.88, which pushed shares above key support at $135.25.

With rising rates on the horizon and the ongoing threat of a Russian invasion of Ukraine, I think investors will continue to move out of riskier tech stocks and into stable mega caps with solid balance sheets, such as WMT.

I like all of that, but I want to see shares pull back just a little before targeting a WMT trade.

If shares of WMT trade back down to $136.00 by February 25, let’s buy the WMT April 14, 2022 $140/$145 Call Spread for $2.00 or less. Plan on exiting the position for a 100% profit or if shares of WMT close below $132.60.

I’m also watching Shake Shack Inc (SHAK), the New York-based fast-casual restaurant chain.

After the market’s closed on Thursday, the company reported its fourth-quarter results that included revenue and earnings of $203.3 million and a loss of $0.25 a share.

Analysts polled by FactSet expected revenue of $203 million and a loss of $0.18 a share. Basically, the company was close to expectations on the top line but had a pretty significant miss on the bottom line.

But, looking ahead, the company guided for revenue between $196 million and $201.4 million in the first quarter of 2022. Additionally, and probably most importantly, the company said it would not provide full-year guidance due to “uncertainty and resulting material economic impact” caused by the pandemic.

Traders never want to hear that a company isn’t willing to forecast what they expect will happen next, and shares dropped more than 11% in Thursday’s after-hours trading.

Before Thursday’s news, shares of SHAK had climbed up to resistance at $78.50, but as I write this, they’ve come down to $66.62, and I think they’re headed back down to test the recent lows near $60.00.

If shares of SHAK bounce back up to $70.00 by February 25, let’s buy the SHAK April 14, 2022 $65/$60 Put Spread for $2.00 or less. Plan on exiting the position for a 100% profit or if shares of SHAK close above $80.00.

Cheers,

— Shah

Source: Total Wealth