A week of Retail Sector earnings reports has started off very Grinch-like with a reported data breach at Macyâ€™s (M) and missed quarterly sales figures and profit forecast cutting at Kohlâ€™s Corp (KSS). The Multiline Retail Sector is down -6.5% in mid-morning trading, generating +$507 million of mark-to-market profits for sector short sellers.
Target Corp (TGT), Macyâ€™s (M), Nordstrom Inc (JWN) and Kohlâ€™s Corp (KSS) continue to be the largest shorts in the sector:
Short selling in the sector had been declining for the first half of the year, primarily in the more discount retail stores such as Target, Kohlâ€™s and Dollar General (DG) with short selling in Macyâ€™s and Nordstromâ€™s increasing. But in the second half of the year we have seen a resurgence of short selling, specifically in Target and Macyâ€™s.
Macyâ€™s and Kohlâ€™s have taken the brunt of todayâ€™s sector price weakness with Macyâ€™s downÂ Â Â Â Â Â Â -11% and Kohlâ€™s down -19.5%, the sector is up +$507 million in mark-to-market profits on weakness across the board. Todayâ€™s profits have turned November profitable, +$36 million, for the multiline sector short sellers and they are now down only -$189 million in mark-to-market losses for the year.
We should see continued short selling in the sector, especially if Targetâ€™s quarterly results on Wednesday are as downcast as Kohlâ€™s numbers today.
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Managing Director Predictive Analytics, S3 Partners, LLC
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