The Australian economy has been doing well over the past few years but a lot of that growth has been driven by mining.
Retail sales have shown no growth for a while now.
Add to that notions of a loss of relevance of physical store locations in an increasingly online world and it’s no surprise that sentiment toward retailing and our big retailers has been poor.
There’s been upheaval in the sector over the past year or two, including failed takeover offers and the changing retail landscape and big news such as the resignation this week of David Jones boss Paul Zahra.
You’d be forgiven for thinking that the sector must be having a shocker.
Certainly that seems to have been the hope of a solid and persistent band of short sellers of Myer and David Jones stock.
Julia Lee of Bell Direct explained in a note to clients this month that big retailers have been in the top 10 most-shorted stocks for most of 2013 (investors sell stock “Short” in the hope of buying it back at a lower price and pocketing the difference).
Lee noted that data from ASIC on short positions as of October 7, showed 14.45% of Myer has been sold short while 11.75% of David Jones was short. These levels have been consistent for much of 2013.
But here’s the thing – if we index the performance of Myer, David Jones and the ASX to 100 at the beginning of the year then the retailers are doing extremely well and are still outperforming the ASX 200 this year up 19.4% and 18.2% respectively to the ASX200 rise of 15.57% as at last night’s close.
Certainly there is a lot of volatility in percentage returns, especially for Myer, but they must be doing something right because the market still likes them and there are enough buyers to keep them outperforming even with the big short interest.