Short Report: Bears load up on beaten down consumer cyclicals into rally

Short interest on Lovesac, Petco, and Children’s Place gathers pace despite the rebound in the sector

Welcome to this week’s installment of “The Short Interest Report" – The Fly’s weekly recap of short interest trends among some of the most widely followed high-short-float stocks. Using the data from our partner Ortex.com, which utilizes the latest information from stock lenders to estimate short interest changes for thousands of publicly traded companies, this report will screen for some of biggest changes in short interest as a percentage of free float and days-to-cover ratios while also considering the short interest data on some of the more volatile and heavier-traded names of the week. Based on the availability of data from Ortex, the report tracks the trading period that covers prior Friday through Thursday of this week, excluding holidays. As a basis of comparison for stocks discussed below, the S&P 500 index was up 1.7%, the Russell 2000 index was down 0.3%, the Russell 2000 Growth ETF (IWO) was up 1.1%, and the Russell 2000 Value ETF (IWN) was down 0.5% in the four-day trading session range.

SHORT INTEREST GAINERS

• Ortex-reported short interest on Lovesac (LOVE) had slipped from a multi-year high of 35% to a one-month low of 31% in mid-May as the stock slid to its lowest level of the year. With shares finding some footing over the past week however, the bearish retrenching has also fizzled, reflecting a growing skepticism over the sustainability of the rally in Consumer Cyclical space. Short position as a percentage of free float was up from 32.7% to 35.2% – a new record high. With trading volume on the name receding, days to cover for Lovesac also jumped from 5.8 to 7.4. In the four-day period covered, the stock rose 7.2%, with another 7.8% added by the blowout employment data-driven Friday’s market bull rush.
• Estimated short interest in Petco (WOOF) hit a multi-year low of 16.2% in mid-April and has since been on a gradual upswing. This week, shorts as a percentage of free float was up from 18.4% to 19.6% – a two-month high. Days to cover also rose from 1.7 to 2.2 – a three-week high. Petco was down 6.9% in the four-day period covered through Thursday but pared nearly all of those losses with a 6.3% rally on Friday, though the stock is still down 36% from its February highs. Analysts had lamented the threat of pet food deflation after the company’s most recent in-line earnings, which had driven the stock’s near-20% decline in the following session.
• Ortex-reported short interest in Children’s Place (PLCE) was up for the second consecutive week, rising from 27.2% to 28.6% – a two-year high. Days to cover on the name was also higher, rising by 70 basis points to a three-week high of 3.4. Shares were down 16.6% in the four-day period covered and is also among the worst performers in the Retail Apparel sector this year, losing more than half of their value. While the stock bounced by over 9% on Friday, it was hit afterhours by the announcement that Children’s Place is losing its place in the S&P Small Cap 600 index.

SHORT INTEREST DECLINERS

• Estimated short interest in Celsius Holdings (CELH) slipped from 22.8% to 20.8% this week, though it still remains entrenched in its three-month-long 19.2%-23.5% range. Meanwhile, the stock has been on a tear this year, up 33% year-to-date and jumping nearly 70% from its mid-March lows. The company’s Q1 earnings announcement three weeks ago earned Celsius an upgrade from Bank of America and multiple price target raises as analysts noted its steep topline growth, while its CEO celebrated the company becoming an “established #3 Energy Drink Brand in the category”. In the four-day period covered, the stock was up 3.3%.
• Ortex-reported short interest on Desktop Metal (DM) reached a three-month high of 29.1% last Thursday, but has since declined to 27.4% this week. The 3D printer playing field has entered a period of upheaval. Desktop Metal announced a $1.8B all-stock merger deal with Stratasys, (SSYS) which had acted in response to increased stake proposal from Nano Dimension (NNDM). Complicating matters further, On Friday, Stratasys has itself come under an unsolicited takeover proposal from 3D Systems (DDD), which is claiming a ‘superior proposal’ for the company.

Keywords: Short selling, short interest, days to cover, securities, lending, utilization, sentiment analysis, Lovesac, Petco, Childrens Place, Celsius Holdings, Desktop Metals