Investments

Short Sellers Bet Against Physical Retailers Pre-Holiday

Short sellers have been betting against brick-and-mortar retailers ahead of the holiday shopping season. According to The Wall Street Journal, these investors have taken their most aggressive positions in recent months, with short positions against the SPDR S&P Retail fund hitting 441 percent of its available shares last week.

“Everyone talks about the holiday season, and how retailers are doing better,” said Seth Golden, a consultant for the consumer-packaged goods industry in Ocala, Florida, “but retailers are fighting an uphill battle. It doesn’t matter what many of them do at this point. Their structure is a storefront, which is only decreasing year after year.”

Golden also runs a website that sends out alerts on his trades, and he revealed that he has been shorting shares of Kohl’s for most of the year. Last month, the company reported lower-than-expected sales, and cut its profit forecast for the year, sending shares down nearly 20 percent on Nov. 19.

“I don’t see growth,” said Golden. “I see only further share-price deterioration.”

In addition, Macy’s shares have lost 76 percent of their value over the past five years, with short positions against the retailer surging to 31 percent of its total share count — a boost from the 13 percent in early August.

However, while some short sellers have generated big paydays with their bets, others have lost big and even been forced out of the trade. For example, they lost $1.3 billion on Target this year after the retailer rose 89 percent, following four straight years of single-digit gains and losses. In addition, discount retailers — such as Dollar General and TJX Companies — have stayed strong.

Michael Rooks, director of digital media at Primm Advertising, has been shorting shares of Target, Lululemon Athletica and Ulta Beauty on a day-to-day basis, and never holding a position past the market’s 4 p.m. close. While he has been successful with Lululemon and Ulta shorts, Target has been tougher.

“The bears have been squeezed to [the bone],” he said. “But I’ve been focusing on little windows.

——————————–

Latest Insights:

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. In the December 2019 Mobile Card App Adoption Study, PYMNTS surveyed 2,000 U.S. consumers for a reveal of the four most compelling features apps must have to engage users and drive greater adoption.

TRENDING RIGHT NOW