The Times - Short Sellers ready to swoop on retail stocks27 Dec 2022 06:02
Hedge funds are poised to profit from any weak post-Christmas trading updates with short-sellers holding large bets against the shares of some of Britain’s biggest retail chains.
Six of the top ten most-shorted stocks on the London Stock Exchange are retailers, according to filings with the City regulator.
Asos, which warned of weak sales in September, is the most heavily shorted company on the stock exchange, with five investors holding a combined 7.4 per cent short position, including Marshall Wace.
The other retailers include Majestic Wine; Boohoo, the online fashion retailer; Kingfisher, the owner of B&Q; and Currys, the electricals retailer which cut its full-year forecasts this month. Investors are also betting on a decline in the share prices of J Sainsbury; Ocado, the online grocer; and THG, the e-commerce group formerly called The Hut Group, according to filings with the Financial Conduct Authority.
The peak festive period is key to the fortunes of the retail sector and the flurry of trading updates issued in early January on the performance over Christmas are keenly awaited by investors. Chains have been battling fragile consumer confidence, rail strikes, rising costs, a likely recession and cold weather earlier this month.
The FTSE 350 retail index, tracking the share price performance of a basket of leading UK-listed chains, is down by about 35 per cent this year, compared with the wider index which has declined by about 2.5 per cent, according to data from Refinitiv.
Figures this month from the CBI’s monthly distributive trades survey showed an unexpected rebound in retail sales volumes growth in December, although retailers do not expect the recovery to continue into the new year.
Next, traditionally deemed a bellwether of the high street, is due to start the post-Christmas trading updates when it issues its fourth-quarter update on January 5.
It will be followed by the likes of Asos, Tesco, Marks & Spencer and Sainsbury’s the following week and Ocado and Currys the week after.
Shiret added: “Investors are wary of retailers which sell big-ticket items and will be looking for how the post-Christmas white goods sale kicks off.”
Clive Black, head of consumer research at Shore Capital, another City broker, said that “big ticket, mass market is the most vulnerable because consumers just don’t have the dosh. Consumer confidence is still bumping along the bottom”.
https://www.thetimes.co.uk/article/b5d33e2e-8545-11ed-8ebd-06f6e5e80272?shareToken=1a4219e1aa224564aad7254efdcecfed
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