US Retail—the Week Ahead
With consumer spending accounting for two‐thirds of US GDP, we look to retail sales figures to gain a good direction of where the economy is headed. August retail sales rose by 0.4% beating analyst forecasts. This week, US retailers are busy reporting their monthly sales for Septem‐ ber ahead of official US Retail Sales figures due on 15th October. We take a look at the key players announcing this week includ‐ ing: Saks (SKS), J.C. Penney (JCP), Kohl’s (KSS) and Dillard’s (DDS).
The Data Explorers Long‐Short ratio (LSR) shows that the US Retail sector has been relatively bearish for the second and third quarters of 2010. In this time the LSR has fallenfrom7.36toalowof6duetoa decrease in long buying. This is supported in the stocks we discuss.
Department store Dillard’s, reporting on Thursday has seen short interest increase from 8% to 20% since May. With 45% of the lendable supply out of loan, this stock is edging towards being heavily shorted. Half of the increased shorting occurred since the end of July during which time institutional lenders have reduced their ownership by 1 million to 21 million shares.
Popular department store J.C. Penney’s shares have been climbing recently. Short interest increased since May from 4% to 10% reaching a Utilization of 30%. How‐ ever, short covering has taken place throughout September lowering the num‐ ber of shares outstanding on loan to 8%. On the long side, institutional ownership has decreased since August from 72 mil‐ lion to a two year low of 60 million shares, taking the shine off the recent bullish sen‐ timent on the short side of the market.
We also observe a similar story in Saks Inc. Short interest has decreased from highs of 33% recorded in May to 22% today, with over 65% of this taking place in Septem‐ ber. Interestingly, institutional ownership fell from 54 million to 49 million shares since August.
It seems that this conflicting sentiment amongst investors is present across the department stores sector as Kohl’s Corp has also experienced similar investment behavior. In this case, short interest is low yet decreased over September to only 1%, with lendable also falling by 10% over the six months.
Amongst the department stores, apparel retailers Gap Inc (GPS), Ross Stores Inc, Abercrombie and Fitch Co (ANF), Gymbo‐ ree Corp (GYMB), Buckle Inc (BKE) and Bebe Stores Inc are also due to report sales this week. Investor sentiment is rela‐ tively positive, with all stocks subject to low levels of short interest and/or short covering over the past month. The excep‐ tion being Ross Stores which has seen a small increase in its short base from 3.5% to 4.5% over the past month.
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