Market Overview

Barnes & Noble, J.C. Penney See Short Interest Rise (BKS, JCP, OMX)

The back-to-school shopping season was underwhelming, and economic confidence is plummeting ahead of the holiday shopping season.

Among troubled retailers, Barnes & Noble (NYSE: BKS), J.C. Penney (NYSE: JCP) and OfficeMax (NYSE: OMX) saw significant upswings in the number of their shares sold short in late September.

Short sellers moved into Best Buy (NYSE: BBY), Bon-Ton Stores (NASDAQ: BONT), Office Depot (NYSE: ODP), Pacific Sunwear (NASDAQ: PSUN) and Rite Aid (NYSE: RAD) more modestly between the September 13 and September 30 settlement dates.

However, short interest in SUPERVALU (NYSE: SVU) was essentially unchanged from the previous period.

The number of their shares sold short in Avon Products (NYSE: AVP), Bebe Stores (NASDAQ: BEBE), GameStop (NYSE: GME), RadioShack (NYSE: RSH) and Sears Holdings (NASDAQ: SHLD) declined during the final weeks of month.

See also: Short Interest Moves In Defense Stocks Ahead Of The Government Shutdown

Below is a quick look at how Barnes & Noble, J.C. Penney and OfficeMax have fared and what analysts expect from them.

Barnes & Noble

This specialty retailer saw short interest increase more than 23 percent in the period to around 10.13 million shares. That was the highest number of shares sold short since April and came to about 28 percent of the total float. It would take more than six days to close out all of the short positions.

Barnes & Noble has a market capitalization of around $825 million and does not offer a dividend. The company recently announced that it hired a former Motorola executive as COO of its Nook unit. Note that both the company's return on equity and the operating margin are in negative territory.

Of the six analysts who follow the stock that were surveyed by Thomson/First Call, only one recommends buying shares. Still, the mean price target, or where analysts expect the share price to go, is about 24 higher than the current share price. But shares traded higher than that target as recently as August.

The share price hit a 52-week low at the end of September, and it finished last week almost seven percent higher than that. The stock has underperformed competitor Amazon.com (NASDAQ: AMZN) and the broader markets over the past six months.

J.C. Penney

This Plano, Texas-based department store operator saw short interest swell more than 16 percent in the final weeks of the month to around 83.52 million shares. That was the sixth straight period of rising short interest. The number of shares sold short was more than 38 percent of the float.

J.C. Penney now has a market cap of less than $2 billion. It does not offer a dividend. Here too, the return on equity and the operating margin are both in the red. Late in September, the company offered $932 million in shares, prompting the share price to fall to a 30-year low.

Only seven of the 24 analysts who follow J.C. Penney recommend buying shares. The consensus recommendation has been to hold shares for at least three months. The mean price target suggests more than 22 percent potential upside, likely due more to the falling share price than to analyst optimism.

The share price hit a multiyear low last week, after falling more than 60 percent since the beginning of the year. Not surprisingly, the stock has underperformed competitors such as Kohl's (NYSE: KSS) and Macy's (NYSE: M) over the past six months.

See also: Applied Materials, Marvell Technology Face Rising Short Interest

OfficeMax

Short interest in this specialty retailer rose more than 24 percent to about 12.08 million shares by the end of September. The number of shares sold short here represents more than 14 percent of the float, and the days to cover fell from more than seven to around five.

During the period, the 11th largest online retailer launched its OfficeMax Digital Innovation Collaboration Center. The company has a market cap of about $1 billion. The price-to-earnings (P/E) ratio is much less than the industry average, and the return on equity is more than 44 percent.

Just four analysts of the 12 surveyed recommend buying shares, though none recommends selling. The share price has overrun the mean price target, indicating a lack of upside potential at this time. The most optimistic individual price target suggests there is more than 38 percent potential upside.

The share price is up about 17 percent in the past month to a high since news of the merger with Office Depot back in February. Over the past six months, the stock has outperformed competitors Staples (NASDAQ: SPLS) and Walmart (NYSE: WMT), as well as the broader markets.

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

Posted-In: Amazon.com Avon Products Barnes & Noble bebe Stores best buy Bon-Ton Stores gamestop J.C. Penney kohl's macy's Office Depot OfficeMax PACIFIC SUNWEAR radioshack Rite Aid Sears Holdings Staples SuperValu WalmartShort Ideas Trading Ideas Best of Benzinga

 

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