Market Overview

Avon And Rite Aid Still Attracting Short Sellers (AVP, PSUN, RAD)

Among troubled retailers, Avon Products (NYSE: AVP), Pacific Sunwear (NASDAQ: PSUN) and Rite Aid (NYSE: RAD) saw significant upswings in the number of their shares sold short during the first weeks of September. Below is a quick look at how these three have fared and what analysts expect from them.

Short sellers moved into Bon-Ton Stores (NASDAQ: BONT), J.C. Penney (NYSE: JCP), Office Depot (NYSE: ODP), OfficeMax (NYSE: OMX), RadioShack (NYSE: RSH) andSUPERVALU (NYSE: SVU) more modestly between the August 30 and September 13 settlement dates.

However, short interest in Bebe Stores (NASDAQ: BEBE) and GameStop (NYSE: GME) was essentially unchanged from the previous period.

The number of their shares sold short in Barnes & Noble (NYSE: BKS), Best Buy (NYSE: BBY) and Sears Holdings (NASDAQ: SHLD) declined somewhat early in the month.

See also: Short Interest Surges in Solar City, Falls in Advanced Energy

Avon Products

This beauty and personal care products purveyor saw short interest increase about 16 percent in the first weeks of the month to around 11.04 million shares. The number of shares sold short has risen in the past five periods and came to more than two percent of the total float. The days to cover grew to more than four.

Avon has a market capitalization of almost $9 billion and a dividend yield near 1.1 percent. The company appointed a new chief of global strategy at the end of August. The long-term EPS growth forecast is about 22 percent, but the return on equity is in negative territory.

Of the 13 analysts who follow the stock that were surveyed by Thomson/First Call, six recommend buying shares; the rest recommend holding them. The mean price target, or where analysts expect the share price to go, is more than 17 higher than the current share price. That would be a new 52-week high.

The share price pulled back almost four percent in the past week, but it is still up about 38 percent year-to-date. The stock has underperformed competitor Revlon (NYSE: REV) and the S&P 500 over the past six months, but it was in line with the performance of Procter & Gamble (NYSE: PG).

Pacific Sunwear

This Anaheim, California-based specialty retailer saw short interest grow more than seven percent early in the month to around 8.16 million shares, the highest in the past year. The number of shares sold short was about 18 percent of the float, and the days to cover rose to more than eight.

Pacific Sunwear now has a market capitalization of about $230 million. The company reported a wider net loss for the most recent quarter and offered disappointing guidance. Note that the return on equity and the operating margin are both in negative territory.

Of the 11 analysts who follow the stock, just four recommend buying shares; the rest recommend holding them. Their mean price target is about 19 percent higher than the current share price. But note that shares were trading higher than that target as recently as August.

The share price has pulled back more than 27 percent from the recent 52-week high. Still, the stock has outperformed competitors such as Abercrombie & Fitch (NYSE: ANF) and Aeropostale (NYSE: ARO), as well as the S&P 500, over the past six months.

Rite Aid

More than 37.75 million shares of this this drugstore operator were sold short at the end of the period. That came to more than two percent of Rite Aid's float, and it was the highest level of short interest since mid-June. The days to cover inched higher but remained at less than three.

After two consecutive periods of declining short interest, shares sold short surged about 32 percent in early September to around 33.54 million. That represented more than three percent of the total float. The days to cover rose to more than two.

Rite Aid, the nation's third-largest drugstore chain, said during the period that same-store sales in August had improved. The company's market cap is more than $4 billion. Its long-term EPS growth forecast is about eight percent, and its price-to-earnings (P/E) ratio is less than that of its peers.

Three of the seven analysts polled recommend buying shares, and the other four recommend holding them. The share price has overrun their mean price target, meaning the analysts see no upside potential at this time. The street-high price target is less than five percent higher than the current share price.

After rising more than 250 percent since the beginning of the year, the share price reached a new multiyear high this week. The stock has outperformed larger competitors CVS Caremark (NYSE: CVS) and Walgreen (NYSE: WAG), as well as the S&P 500, over the past six months.

See also: BioMarin, Celgene Lead Trend in Biotech Short Interest

At the time of this writing, the author had no position in the mentioned equities.

Posted-In: abercrombie & fitch Aeropostale Avon Products Barnes & Noble bebe Stores best buyShort Ideas Trading Ideas Best of Benzinga

 

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