Amongst the plethora of companies updating the markets this week, we focus our attention on securities lending sentiment in the Retail and Media sectors. Companies covered include Adidas AG (ETR:ADS), Target Corp. (NYSE:TGT), Gap Inc (NYSE:GPS), Saks Inc (NYSE:SKS), Liberty Media (NASDAQ:LINTA) and Trinity Mirror plc (LON:TNI).
In the UK, we have found that second-tier retailers, including HMV and Home Retail Group, account for almost a third of the top 20 FTSE All-Share companies with the highest amount of short selling activity. It is worth looking to see whether investors share this bearish view of retailers outside the UK.
Global trainer giant, Adidas AG will update the market with full-year results on Wednesday. The company, which has just announced collaboration with Diesel and rapper Snoop Dogg, has seen its shares perform well over the past year. Despite this, short interest has held steady at 2.5% of total shares outstanding. It is interesting to note that holdings of long-only funds who lend, our proxy for institutional ownership, have risen by 10 million shares over the past year to 32.8%.
In the US, Target Corp, Gap Inc. and Saks Inc. will all update the market about February sales performance on Thursday. Target Corp posted a 10.5% quarterly profit increase on the strength of holiday sales that easily bettered those of Wal-Mart Stores Inc and estimated that its same-store sales would rise 4 percent to 5 percent this year, according to Reuters. The company also predicted that its branded credit card discount program could help it reach annual sales of USD 100 billion within seven years. Short interest in Target is low at less than 0.5% of total shares out on loan, while the shares have fallen from USD 60 to USD 50 this year.
We witness negative investor sentiment towards Gap Inc., which the WSJ noted squeezed higher profits from an uptick in revenue, after ending 2010 with mixed sales success. The company announced fourth-quarter results last Friday which were reported to be slightly ahead of analyst expectations. Short interest has increased from 0.5% at the end of November 2010 to an annual high of 3.5% of total shares outstanding on loan.
Saks Inc. returned to profitability in its fiscal fourth-quarter as the department store chain sold more items at full price and used fewer promotions, according to Bloomberg. Short interest is still high at 8% of total shares outstanding on loan, yet this is considerably below the high of 35% seen last May.
Over in the media sector, two stocks announcing results this week are interesting from a securities financing flow perspective. Liberty Media is reported to be among the bidders in the EUR 3 billion Kabel Baden-Wurttemberg auction by Swedish private group EQT. The US listed media group will announce fourth-quarter earnings this week and has seen shorts cover their positions from 1.6% of total shares outstanding on loan in May last year to only 0.4%, while the share price has almost doubled to USD 17.
In the UK, regional newspaper publisher Trinity Mirror will announce full-year results on Thursday. The UK Press Gazette reported that Trinity Mirror was the regional publishing group with the fastest growing network of news websites in the UK in the second half of last year. Despite the share price having halved, short interest has fallen sharply from the annual high seen in July last year of 5% of total shares out on loan to less than 1% today. Institutional holders who lend have reduced their holding by 10 million shares since November to 27.1%.
