Judging from the extensive commentary trying to fathom trading over the crucial holiday season, it seems investors still don’t know how to react to mixed messages coming from retailers blaming the adverse weather and rising input costs. We look at SuperValu (NYSE: SVU), Constellation Brands, Inc. (NYSE: STZ), SuperGroup PLC (Lon: SGP), Marks & Spencer Group PLC(Lon: MKS), J Sainsbury PLC (Lon: SBRY) Tesco (Lon: TSCO), Morrison Supermarkets PLC (Lon: MRW), Greggs plc (Lon: GRG) and Halfords Group Plc (Lon: HFD).
The FT reports that sales at leading US retailers have failed to meet expectations yet the index produced by the International Council of Shopping Centers reached its highest level for two years, although short of what analysts were expecting.
SuperValu, the third largest US grocery chain is due update the market this week. Shares in the company which operates multiple brands, including Acme and Shaw’s, have struggled and Reuters reports that Morgan Stanley recently advised investors to cut holdings as rising food costs threaten to dent results. The U.S. grocery chain is more leveraged than its rivals and its same-store sales have fallen as it struggled to retain market share. Short interest has been consistently high over the last nine months and peaked in November at 14% of total shares outstanding on loan. Following short covering this quickly halved to 7.54% of total shares where it has remained since December. This investor pessimism is mirrored on the long side and during the same period, institutional investors who make their stock available for borrowing have reduced their positions from 72 million to 63 million shares.
Constellation Brands, Inc., the international wine and spirit company, announces earnings on 11 January. Morgan Stanley recently downgraded the stock from an “overweight” rating to an “equal weight” against a backdrop of a strong price performance over recent months. Short interest has declined from 3% of total shares outstanding on loan in September to an annual low of 1%. The longs have been adding to their positions all year and now own 52 million shares, just off the annual high.
In the UK, a raft of retailers are updating the market with earnings. Last week, we looked at high levels of short interest in Home Retail (HOME – 12%), HMV (HMV - 24%) and Dixon Retail (DXNS – 8%), so I won’t cover these again here.
Trendy SuperGroup PLC is expected to provide a trading update on 12 January. Since floating last March the shares have flown, despite a hiccup in December after they cautioned in its half year results that rises in raw material prices might affect gross margins in the next financial year. Short interest stands at an all time high of 2.2%, which is up 17% on the week and represents over half of the available supply that can be borrowed.
Supermarket giants such as Marks & Spencer Group PLC, J Sainsbury PLC and Tesco as wellas Morrison Supermarkets PLC will be updating on trading over the holiday season early next week. Short interest in all four companies is low although there has been some short covering of M&S, as the percentage of shares outstanding on loan has fallen to an annual low of below 2%.
Minnow bread maker, Greggs plc will provide an update on 12 January. The company has seen consistent short interest at 3% of total shares outstanding on loan, although long only investors have expressed a degree of skepticism and reduced their holdings from over 20 million shares in August to 18.5 million. Halfords Group Plc, which sells bikes amongst other things, will update the market on 13 January. The company has seen strong investor support since August with long only investors increasing their stake in the company from 40 million shares to over 55 million. Yet, short interest doubled in October to over 4% and has remained steady since.
