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Nov 20, 2018

S3 Analytics: Retail Shorts up $2.0 Billion on Overall Sector Weakness

Like Black Friday shoppers, investors are discounting prior performance and looking forward to the holiday shopping season to decide which retailors to put on their naughty or nice lists. Most of the larger retailers posted impressive previous quarter sales but investors are looking closely for signs for potential holiday misses. Retailers such as Target Corp (TGT), Kohl’s Corp (KSS) and TJX Cos (TJX) are looking at profit margin rates and profit guidance’s that may not meet expectations as they ramp up e-commerce, shipping and remodel stores to lure in buyers. Several retailers are having revenue and operational difficulties with L Brands (LB) cutting its dividend, Lowes (LOW) closing down two home improvement subsidiaries and its Mexican retail operation and Sears (SHLDQ) filing for bankruptcy.

Short sellers have been very active in the Retailing Sector, making it the most shorted sector in the domestic market with $70.6 billion of short interest.

As of late-afternoon, today’s most profitable retail shorts are Alibaba Group (BABA) with +$502 million in mark-to-market profits; Target (TGT) +$223 million; Kohl’s (KSS) +$165 million and L Brands (LB) +$87 million. And the least profitable shorts are Pinduoduo (PDD) with -$91 million in mark-to-market losses; Best Buy (BBY) -$39 million; Urban Outfitters (URBN) -$21 million and Wayfair (W) -$18 million.

With $2 billion in daily mark-to-market profits sector wide, we would expect increased momentum based short selling in the retail sector to continue as well as ancillary stocks such as FedEx Corp (FDX) and United Parcel Service (UPS) which made short seller $55 million in mark-to-market profits today as well.

Want deeper insight into the above analysis?
Contact: Ihor.Dusaniwsky@S3Partners.net
Managing Director Predictive Analytics, S3 Partners, LLC
The information herein (some of which has been obtained from third party sources without verification) is believed by S3 Partners, LLC ('S3 Partners') to be reliable and accurate. Neither S3 Partners nor any of its affiliates makes any representation as to the accuracy or completeness of the information herein or accepts liability arising from its use. Prior to making any decisions based on the information herein, you should determine, without reliance upon S3 Partners, the economic risks and merits, as well as the legal, tax, accounting and investment consequences, of such decision.

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