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Home Retail Shares Jump as Argos Sales Catch Out Short Sellers

June 19 (Bloomberg) -- Home Retail Group Plc rose the most in more than three years in London trading as first-quarter sales at the Argos chain beat estimates, catching out short sellers.

The shares advanced as much as 16 percent, the steepest gain since November 2008. According to Data Explorers, about 22 percent of Home Retail’s stock is held by short sellers, who borrow shares to sell in the expectation of buying them back later at a lower price. That’s the highest level in at least five years.

Sales at Argos stores open at least a year fell 0.2 percent in the 13 weeks ended June 2, the Milton Keynes, England-based company said today in a statement. The median estimate of four analysts compiled by Bloomberg was for a decline of 4 percent. The retailer also said it’s “comfortable” with analysts’ profit estimates for this year.

“This morning’s update is much better than expected, especially at Argos, which delivered a strong performance in consumer electronics,” said Gillian Hilditch, an analyst at JPMorgan Cazenove with an overweight recommendation on the stock. She said the stock is vulnerable to a short “squeeze” in which short sellers rush to buy the stock on positive news to limit their losses.

Home Retail was up 15 percent at 85.40 pence as of 8:30 a.m. The stock is little changed this year.

To contact the reporters on this story: Paul Jarvis in London at pjarvis@bloomberg.net; Sarah Shannon in London at sshannon4@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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