City traders in £3.6bn bet AGAINST high street
Hedge funds ‘short’ top store shares amid fears of poor Christmas sales
CITY traders have taken a £3.6 billion bet against the retail sector amid widespread fears about Christmas sales figures.
Britain’s biggest retailers are due to report in the next fortnight including Marks & Spencer, Tesco, Sainsbury’s and Next. Dozens of hedge funds have taken ‘short’ positions in some of Britain’s largest shopping chains – a mechanism allowing them to bet on a price fall by borrowing shares.
The controversial practice is monitored by the Financial Conduct Authority which logs short positions of more than 0.5 per cent.
The sudden activity in recent weeks will be seen as a loss of faith in some of the sector’s biggest stores groups.
Department store Debenhams was last night the second most shorted company on the stock market with 14 per cent of its shares out on loan.
Hedge fund Odey Asset Management, run by highprofile City boss Crispin Odey, holds the biggest short position in Debenhams with more than 5 per cent.
His total position on the sector accounts for £113 million – a fraction of the total, reckoned to be £3.6billion according to data tracked by the FCA.
Meanwhile, US fund AQR Capital Management increased its short position in Tesco to 2.5 per cent on December 21 – about £425million in shares – making it the biggest single bet against a successful Christmas.
Other firms in the firing line include Ocado, Marks & Spencer, Sainsbury’s and Morrisons, all with more than 10 per cent of their stock out on loan. The swoop on the sector follows weeks of speculation about difficult high street trading as online retailers, poor weather and consumer nerves mean shoppers made fewer trips to stores.
Richard Lim, at analyst Retail Economics, said: ‘The conditions leading up to Christmas have been pretty tough.
‘The squeeze on personal finances is intense and we feel that consumers have started to tighten their belts. ‘This has come at entirely the wrong time for retailers in the run-up to Christmas.’
One source, who works for a restructuring firm, said: ‘Christmas trading numbers haven’t been brilliant.
‘There was a lot of discounting so some retailers might have made their sales targets but profit margins were under pressure.
‘I think some of the bigger high street stores such as John Lewis, Marks & Spencer and Next have escaped the worst of it but others have struggled.’
London-based hedge fund Marshall Wace, whose founders Sir Paul Marshall and Ian Wace were in opposing camps over Brexit, has made a wager against the overall sector with a stake of more than £360million.
One City insider said: ‘This is a big bet on a bad Christmas for retailers.’