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H&M short sellers double bets as investors wear 18% drop

Jun 18 2017 11:36
Bloomberg: Hanna Hoikkala and Niklas Magnusson

Stockholm - Hennes & Mauritz shareholders have seen the value of their investment slump 18% so far this year. Short sellers are betting the stock has more to go.

Short interest in the global clothing retailer’s stock has more than doubled to 7.2% of shares outstanding, from 3.1% in early 2017, according to Markit data.

That has made H&M the most shorted stock on the Stockholm OMXS30 benchmark index after Fingerprint Cards, whose shares have fallen after a raft of profit warnings. Early this year, H&M had the ninth-largest short interest.

H&M shares have had a rough ride amid concerns about pricing pressure and the risks of markdowns on clothing lines. Its slump in 2017 makes it the second-worst performer on the OMXS30 index, which has advanced 7.4%. Spanish rival Inditex has climbed about 7%.

That has eroded H&M’s market capitalization to 353bn kronor ($41bn) from a peak of more than 600bn kronor in March 2015. Earlier this year, Nordea Bank overtook H&M as Sweden’s biggest company by value as its shares rose and H&M’s fell.

On Thursday, H&M reported sales growth for the three months through May that missed analyst’s estimates, driving the shares as much as 2.9% lower. The 5% increase percent in local currencies contrasts with Inditex’s 12.5% advance in its fiscal first quarter.

Any further decline in H&M’s share price could provide H&M Chairman Stefan Persson with additional buying opportunities, after he spent almost 5.5bn kronor buying more shares this year. The Persson family’s stake in H&M has increased to 39.9%, from 38.5% at the end of 2016.

While analysts still see an average return potential of about 13% for H&M in the coming 12 months, they have cut their average price target to 240.7 kronor from 265 kronor at the beginning of the year.

Some 33% of analysts have buy ratings on H&M shares, while another third advise clients to sell and the rest have hold recommendations.

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