H&M Short Sellers Double Bets as Investors Wear 18% Drop

Updated on
  • Clothing retailer is Stockholm’s second-most shorted stock
  • Stefan Persson family has increased its stake to almost 40%

Hennes & Mauritz AB shareholders have seen the value of their investment slump 18 percent 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 percent of shares outstanding, from 3.1 percent 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 AB, 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 percent. Spanish rival Inditex SA has climbed about 7 percent.

That has eroded H&M’s market capitalization to 353 billion kronor ($41 billion) from a peak of more than 600 billion kronor in March 2015. Earlier this year, Nordea Bank AB 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 analysts estimates, driving the shares as much as 2.9 percent lower. The 5 percent increase in local currencies contrasts with Inditex’s 12.5 percent 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 5.5 billion kronor buying more shares this year. The Persson family’s stake in H&M has increased to 39.9 percent, from 38.5 percent at the end of 2016.

While analysts still see an average return potential of about 13 percent 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 percent 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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