As the reporting season begins to draw to a close, we look at companies reporting earnings this week which are subject to interesting securities lending activity. These include Tiffany and Co (NYSE:TIF), Zale (NYSE:ZLC), Mitchells and Butlers (LON:MAB), J Crew Group (NYSE:JCG), Campbell Soup Company (NYSE: CPB) and De La Rue Plc (LON:DLAR).
The fear of the recession impacting consumer demand seems to be receding as Tiffany & Co share’s reached an annual high last week. Increasing prices of precious metal and diamonds seem to be the next wave of threats to hit the industry from the supply chain. It will be interesting to see whether jewellers pass on these costs to the consumer or choose to absorb them reducing profit margins. Against this backdrop, short interest in Tiffany and Co is at record highs, although short covering over the past month had reduced this figure slightly from 15% to 13%. It is interesting to note that a third of the lendable supply is currently out on loan.
Mid-market rival Zale Corp has been subject to positive investor sentiment over the past 6 months with short sellers continuing to cover positions. Short interest has fallen from 20% down to 9% of total shares outstanding on loan since May. Although short interest is falling, it remains higher than average and the proportion of lendable supply out on loan is noteworthy at 30%.
Apparel retailers J-Crew Group are to report third-quarter earnings today. The shares are at an annual low and a build up of short interest can be traced back to the share price tumble in July. Short interest has since more than doubled from 6% to 12% of total shares outstanding on loan. This represents a significant proportion of lendable supply out on loan, which stands at a record high of 45%. Institutional ownership averages at 15.5 million shares over the past year.
Campbell Soup Company are due to report first-quarter 2011 earnings on Tuesday. The shares reacted badly when the company reduced full-year 2011 guidance last week, despite Campbell raising its dividend by 5%. We observe negative sentiment from both the long and short side of the market. Over the past year, short interest has been steadily increasing from 1% to 6% while institutional ownership has declined from 44m to 38m shares. The proportion of lendable supply currently out on loan stands at a record high of 35%.
UK based pub operator Mitchells and Butlers will report preliminary 2010 earnings on Tuesday. There has been a slight uptick in short interest over the past month ahead of its announcement last week that it has completed the disposal of 333 non-core pubs to a private equity firm. Short interest has increased from 2.8% to 3.6% of total shares outstanding on loan, despite the shares reaching a new 52 week high.
De La Rue Plc, reports interim 2010/2011 earnings on Tuesday. The commercial security printer and paper group has been plagued with bad publicity since July and the shares have continued their downwards trajectory. However, institutional investors have not been swayed and continue to hold a steady 16 million shares. Short interest has been sporadic since August. The percentage of total shares outstanding on loan increased from 4% to 7% in August, but short sellers covered their positions down to 3% in September. This behaviour was then repeated over October when short interest hit 4.5% but has since decreased to 2.8%. This week’s results should provide more clarity.
