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Nov 29, 2018

S3 Analytics: Shorts Lose Their Shirts in Abercrombie & Fitch Rally

Abercrombie & Fitch Co. (ANF US) is up 20%, after being up over 26% earlier in today’s trading session, due to comparable same store sales for both its namesake and Hollister brands which handily beat analysts’ expectations. Growth was especially strong in the retailer’s online sales efforts. Although ANF is not bumping up its 2018 sales forecasts, it has decided not to close as many of its brick and mortar stores as it had earlier planned.

ANF short interest is $285 million, with 16.65 million shares shorted, or 25.22% of its float. Short sellers have been pounding the stock since its price peaked in mid-August with over 4.9 million shares shorted in the 3rd and 4th quarters, an increase of +41.74%. There was a slight pullback of shares shorted in November, ahead of earnings, as shorts realized some of their shorter-term profits.

ANF short sellers were not the only ones covering some of the Apparel Retail short exposure, short interest in the domestic Apparel Retail Sector declined by $953 million, or -13%, to $6.5 billion over the last month due to holiday sales optimism for companies such as TJX Cos Inc (TJX US), Burlington Stores (BURL US), Urban Outfitters Inc (URBN US) and The Children’s Place (PLCE US.)

ANF shorts are down $65.3 million in mark-to-market losses on today’s +20% price move which took out most of this quarter’s profits and leaves short sellers down $57.3 million in mark-to-market losses, or -74.65% for the year. ANF short sellers were getting close to being back in the slimming black prior to today’s rally after a dismal 1st quarter where they were down $99 million, -32.21%, in mark-to-market losses. After a flat 2nd quarter, shorts were up +$45 million and $62 million in the 3rd and 4th quarters, respectively.

But it looks like ANF short sellers are not ready to throw in the designer towel just yet, we are seeing over 600k of new short sales today as there is strong short selling into today’s rally. Short sellers are viewing this as an opportunity to get more short exposure at more attractive levels, thinking that the higher-end Apparel Retail Sector might not perform as well as moderate apparel retailers like TJX and Burlington.

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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