Hedge funds have ventured more than £3bn towards Britain’s biggest retail names as worries grow about a strike in consumer spending and the health of bricks and mortar retail chains.
High street valorous Marks & Spencer and Debenhams, pet chain Pets at Home, and grocers Morrisons and Ocado are five of the ten most-shorted shares in the UK.
More than 15pc of Debenhams stocks are presently on loan to hurdle funds that have bet the business store chain’s latest turnaround strategy will fail to recover from falling fashion sales.
Short-sellers use stock from larger investors ahead of selling it on in the hope of regaining it at a lower price in the future and gaining from the difference.
Back at the financial crisis, the City’s watchdog has ordered the disclosure of all short positions serving more than 0.5pc of the target firm.
The disclosure threshold indicates the bets against retailers could be much bigger than the £3bn total estimated by The Sunday Telegraph from public data.
Short-sellers are aiming at the high street as new figures last week from GfK revealed that consumer confidence has fallen to its weakest level since shortly after the Brexit vote amid growing inflation.
Official numbers have also shown that the UK is undergoing the longest period of declining disposable household earnings since the 1970s.
Crispin Odey, whose stock Odey Capital Management has short positions worth over £44.7m against Debenhams, Pets at Home and Sainsbury’s, stated that he was as worried about the structural issues that hounded the British retail sector as the gloomy financial outlook.
“Retailers’ operating earnings now barely cover their rents, rates and services bills,” he said.
“They have then had to face the fall in the value of sterling which has made purchasing inventory abroad significantly more expensive, and retailers like Debenhams have long 20-year leases that they can’t get out of.
“At the same time borrowing is increasing, and people are dipping into their savings, and I think we are at the peak of an economic cycle that will all come to a horrible end.
“I don’t think Tesco or Sainsbury’s will go bankrupt, but I think they have got further to fall”, he added.
London fund Marshall Wace has been the most competitive short-seller against the UK retail sector, posting over £360m on the future stock price declines in Marks & Spencer, Ocado, Pets at Home, Halfords, Sainsbury, Morrisons and Sports Direct,
Blackrock, the world’s largest fund manager, has a bet about £244.7m against retailers from Halfords to B&Q owner Kingfisher.
Shopping centre owners have also been marked by hedge funds who are hitting into shifting consumer practices away from favourite retailers. Hammerson, which owns Birmingham’s Bullring, and Intu, which counts Lakeside among its assets, are on short-sellers’ hit lists.