Will Lululemon Short Sellers Be Back?

• Short sellers appeared to shy away from this yoga pants maker in recent periods.
• The just-released third-quarter numbers were better than expected.
• Analysts were pleased and the share price popped after the earnings report.

Some short sellers seemed to be getting out of the way of Lululemon Athletica inc. LULU in the lead up to its most recent quarterly report. The athletic apparel maker and retailer did manage to make a pretty good showing, beating consensus expectations on the top and bottom lines. Growing e-commerce numbers got some of the credit, and the results managed to win over at least one prior bear.

Were the short sellers right to shy away, or will they be back now that expectations are growing?

Between the Oct. 13 and Nov. 15 (latest) settlement dates, this Vancouver-based yoga products maker saw the number of its shares dwindle by almost 2 million shares to more than 6.71 million. That latest figure represents 7.1 percent of the total float, and note that short interest was lower only twice in the past year. At the average daily trading volume as of mid-November, it would take a little more than five days to cover all short positions.

Lululemon's share price ended the first two weeks of last month more than 5 percent higher, while the S&P 500 was essentially flat. The shares have gained around 10 percent since the settlement date, mostly after the recent earnings report. The consensus recommendation of the analysts polled by Thomson/First Call is to buy the shares, but their mean price target so far is still down at $66.50.

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Things remain tough in both the athletic wear and retail arenas. One analyst does see a potential boost to athletic retailers from tax reform, while admitting that it's unclear whether Lululemon will see much of that benefit. In addition, there have also been rumors about takeover chatter. So, will the short sellers be back? The numbers from the Nov. 30 settlement date will be released early next week and will provide the next look.