Retailers feel the pinch from consumers and short sellers

There has been a sharp decline in UK retail sales, with June recording the weakest performance for a year, according to a report by the CBI employers group. Despite average short interest across the UK retail sector standing at a low 0.9% of total shares outstanding, almost a third of the sector displays high levels of short interest. Over in the U.S, the Retail sector saw the second highest frequency of stocks reaching new annual short interest highs over the past week in comparison to other sectors.

Home improvement takes a back seat

Home Retail Group Plc (LON:HOME) has announced it is to acquire the Habitat brand to sit amongst Homebase and Argos in its portfolio of businesses. This follows its trading statement released earlier this month which prompted a sell-off by the markets resulting in a 25% fall in its share price. Short sellers, who had shown a bearish sentiment towards this stock over the past year, had began covering their short positions after share price and short interest peaked in April. However, the recent plunge in share price has reverted short sellers to increase their positions in this stock to 18% of total shares outstanding on loan. This makes Home Retail Group the most shorted retail stock in the UK. On the long side of the market, institutional owners have held their holdings which represent 35% of total shares over the last four months.

Short interest in Carpetright Plc (LON:CPR) reached a new two year high last week with 11% of total shares outstanding on loan, ahead of full year earnings due to be reported this week. With almost three quarters of stock available to be borrowed out on loan, supply is running low and this stock may in turn be expensive to borrow. However, this bearish sentiment is not reflected by institutional investors who currently hold 12% of total shares and have increased total holdings by 60% since the start of the year.

New annual short interest highs in U.S. specialty retail

15% of specialty retail stocks reached new annual short interest highs in the U.S. last week.

Short interest in the department store Stage Stores, Inc. (NYSE:SSI) reached a new annual high of 10% of total shares outstanding last week. Shorts have been building in this stock since April when the share price began to fall after reaching new annual highs. Although the share price continues to fall, there has been no profit taking. Additionally, with only 17% of the total lendable supply currently out on loan, short sellers have an abundance of stock which they are able to borrow. Institutional investors are heavily invested in this stock holding almost half the total shares outstanding.

Books-A-Million and Barnes and Noble have both recorded short interest annual highs in the past two months. The share price of Books-A-Million, Inc. (NASDAQ:BAMM) is currently trading at annual lows following further price falls in reaction to a reduced quarter one sales. Short interest has been consistently rising since March and has reached a new annual high of 10% of total shares outstanding. More than 80% of the lendable supply is currently out on loan resulting in a hard to borrow and expensive stock. This bearish sentiment is also reflected by the institutional investors who have reduced total holdings to 10% of total shares.

Barnes and Noble, Inc. (NYSE:BKS) is currently a very volatile and active stock due to speculation of a takeover. Short sellers took a contrarian view increasing short interest from 12% to a new annual high of 24% between March and May as the share price rose more than 100%. They have since rushed to cover their positions as the share price continues to trade in its upper quartile range. Short interest has since reduced to an annual low of 10% of total shares outstanding on loan.