Short Report: Bears question bounce in department stores, apparel stocks

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 2.4%, the Nasdaq Composite was up 3.0%, the Russell 2000 index was up 2.7%, the Russell 2000 Growth ETF (IWO) was up 2.7%, and the Russell 2000 Value ETF (IWN) was up 2.9% in the five-day trading session range through Thursday, January 25.

SHORT INTEREST GAINERS

• The acknowledgment of a “highly promotional marketplace” amid a “more cautious consumer behavior” by Nike (NKE) management in its earnings call last month is being echoed by the rise in bearish positioning among some of the Consumer Cyclical names we follow, which looks to be the unifying theme of this week’s “Short Report”. Ortex-reported short interest as a percentage of free float in footwear/accessory retailer Designer Brands (DBI) rose from 21.4% to 24.7% – one-month high. Similarly, short positioning in apparel company Guess (GES) was up four percentage points to one-month high of 30.7.%. Department stores Nordstrom (JWN) and Kohl’s (KSS) both saw their short interest positioning rising three percentage points to a two-month high of 21.4% and a six-week high of 28.5%. All four names traded higher in the five-day period ended Thursday – Designer Brands up 3.8%, Guess up 3.2%, Nordstrom up 12.1%, and Kohl’s was up 16.7% – though short-sellers are questioning whether the Goldilocks macro narrative of strong economy and lower inflation permeating this week will translate into improved retail demand for consumer.
• Ortex-reported short interest on Vital Energy (VTLE) has correlated much closer with its stock price since early December, rising from 18% to 33% as the stock gained 20% into the year-end and then slinking back to a low of 24% as the stock gave back all of those gains in the first three weeks of January. This week, shorts as a percentage of free float were up five percentage points to 29.6% as shares gained 6.3% in the five-day period covered. Days-to-cover on the name, meanwhile, has been on a month-long ascend, rising over 200bps to 6.9.
• Estimated short interest in Luminar (LAZR) stayed rangebound between 21.5% and 27% over the course of the second half of 2023 even as shares lost more than half of their value from August and through November. This week, just as the stock looked to bounce from near-all-time low with a 23% jump in the five-day period through Thursday, the bears are showing no trepidation, with shorts as a percentage of free float rising from 25.2% to 30.6% – the highest level since last February.
• Ortex-reported short interest on Cutera (CUTR) had been contained around 37% through January despite the volatility in the stock, as shares om the dermatology solutions provider nearly doubled since the company pre-announced better than expected Q4 on January 9 and then surrendered all of those gains. Reported shorts were much more active this week however, rising from 37% to about 45% this week, while the stock fell 14%.

SHORT INTEREST DECLINERS

• Estimated short interest on Maxeon Solar (MAXN) hit a multi-year high level of 30% earlier this week, though shorts are indicated to have pared their bets by Thursday, with Ortex data showing bearish positioning slip back to 25.4%. Likewise, days to cover on the name was down 100bps to 4.2. Shares of the solar panels / energy solutions designer were jolted higher in mid-December by the macro-oriented promise of interest rate relief, nearly doubling into the year-end. January saw the stock erase much of that rally, though the bearish build-up for much of this month appears to normalizing back down to mid 20% area. In the five-day period through Thursday, Maxeon was up about 5%.
• Ortex-reported short interest in Carvana (CVNA) ascended from about 38% in early December to a three-month high of 44.5% by January 10th, though what started as a gradual reversal in bearish positioning last week accelerated this week, with shorts as a percentage of free float falling from 43.6% to 39.1% by Thursday. In a familiar refrain for this week’s report, Carvana shares had doubled from early December lows into the year-end but gave away more than half of those gains in January, with bears willing to reduce exposure to gauge whether the selling momentum has slowed. Carvana shares were down just over 4% in the five-day period covered.