Short Interest in Struggling Retail Stocks Declines (AVP, BEBE, SVU)
By and large, the short interest in troubled retail companies declined during the first two weeks of February. However, the number of shares sold short in Avon Products (NYSE: AVP), Bebe Stores (NASDAQ: BEBE), GameStop (NYSE: GME) and Pacific Sunwear (NASDAQ: PSUN) increased between the January 31 and February 15 settlement dates.
But short interest in Barnes & Noble (NYSE: BKS), Best Buy (NYSE: BBY), Bon-Ton Stores (NASDAQ: BONT), J.C. Penney (NYSE: JCP), RadioShack (NYSE: RSH), Rite Aid (NYSE: RAD), Sears Holdings (NASDAQ: SHLD) and Supervalu (NYSE: SVU) declined during that time.
Of these retailers, Avon Products, Bebe Stores and Supervalu saw the largest swings in short interest between the January 31 and February 15 settlement dates.
This beauty and personal care products purveyor saw short interest rise more than 11 percent in early February to 11.71 million shares. But that was the second lowest number of shares sold short since last July, though the average daily volume was higher than in the preceding periods. Short interest is more than two percent of the float, and days to cover remains at less than two.
Avon shares soared after its most recent earnings report, which was boosted in part by increased sales in Brazil. The company now has a market capitalization of more than $8 billion and a dividend yield near 1.2 percent. The long-term earnings per share (EPS) growth forecast is more than 20 percent but the return on equity is in negative territory.
Of the 14 analysts who follow the stock that were surveyed by Thomson/First Call, just four recommend buying shares; the rest recommend holding them. But their mean price target, or where they expect the share price to go, is more than 12 percent higher than the current share price. That target is less than the 52-week high from last spring.
Shares sold short in this women's fashion retailer jumped more than 50 percent in February to 2.79 million, the highest level of short interest in at least a year. Shares also saw the highest daily volume in a year. The short interest is now a little more than seven percent of the float.
This California-based company operates more than 240 stores in North America and Japan, and it posted a net loss in its most recent quarterly report. Its market cap is about $330 million. Here too the return on equity is in the red, though the long-term EPS growth forecast is more than 20 percent.
Only one of the three analysts polled recommends buying shares, and that has been the case for the past three months. But the mean price target indicates upside potential of almost 27 percent. However, that target is well less than the 52-week high.
Shares are flat year to date, but down about 56 percent from a year ago. No surprise, but the stock has underperformed larger competitor Nordstrom (NYSE: JWN) over the past six-months.
Short interest in this operator of various supermarket chains decreased more than 14 percent to 75.91 million shares by mid-February. But note that the shares sold short still represents about 36 percent of the float, and the days to cover jumped to more than 17.
In early February, Supervalu announced a new president and chief executive, part of a deal to sell some of the company's assets. The company currently has a market cap of about $840 million. The forward earnings multiple is less than the industry average price-to-earnings (P/E) ratio. And again, the return on equity is in the red.
Just one analyst of the 13 surveyed recommends buying shares. All the rest recommend holding them. The share price has overrun their mean price target, meaning the consensus is that the stock currently has no potential upside.
The share price is up more than 56 percent year to date, although there has been little movement since late January. Over the past six months, the stock has outperformed competitors Kroger (NYSE: KR) and Safeway (NYSE: SWY), as well as the broader markets.
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Tags: Avon Products, Barnes & Noble, bebe Stores, best buy, Bon-Ton Stores, gamestop, J.C. Penney, Kroger, Nordstrom, Office Depot, OfficeMax, PACIFIC SUNWEAR, procter & gamble, radioshack, Revlon, Rite Aid, Safeway, Sears Holdings, SuperValu