DIY retail chain Kingfisher cemented its place as the UK’s most shorted company in July as a further 0.78% of its shares were targeted by short-sellers, the Financial Conduct Authority’s short register shows.
Short positions on Kingfisher – which owns B&Q and Screwfix – rose to 9.18% over the month as WorldQuant became the eighth firm to bet against the company, buying 0.5% of its shares.
An additional five firms also increased their pre-existing positions in Kingfisher while shorted shares in its closest contender, Cineworld, dropped 0.27% from where they had stood in June.
The cinema chain held the top position for several months until Kingfisher leapt to the front, with DIY sales down from their pandemic highs.
Many consumers took to home improvements to fight lockdown boredom and make their immediate surroundings more pleasant, but sales have slowed now that Covid restrictions have been rolled back - first quarter sales were down 5.4% year on year and Kingfisher’s share price fell 31.1% over the past 12 months.
Share price of Kingfisher over the past year
Source: Google Finance
However, it’s not all doom and gloom, according to Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, who pointed out that first quarter sales were up 16.2% on a three-year basis.
She said: “A sizeable chunk of customers that picked up a hammer for the first time have kept coming back, thanks to their new skills and a shortage of labour in the building trade.”
Likewise, Kingfisher successfully overcame the supply chain issues that have plagued many industries this year, according to Streeter.
“It’s managed to deftly manage ongoing supply chain issues, with product availability improving even as the price of raw materials has stayed volatile,” she added.
This was echoed by Adam Vettese, analyst at eToro: “There are concerns about whether global supply chain issues will affect stock availability and if product price inflation will hit sales, but Kingfisher seems to be managing these issues well to date.
“The housing market in the UK is still strong so we expect demand for DIY products to remain resilient.”
Kingfisher also announced in May that it will be buying back £300m of its own shares, potentially a good sign for shareholders who could see the value of their holdings increase.
Elsewhere on the UK’s most shorted list, travel and aviation companies have seen some improvement throughout July.
Airlines such as Wizz Air, easyJet and British Airways owner International Consolidated Airlines had a surge in short-sellers taking an interest in June as airports descended into chaos.
Worker strikes in major UK airports have led to many flight delays, cancellations and refunds, with further strike action throughout the busy summer period likely to add additional strain on airlines.
These pains have arrived just as aviation companies are emerging from a two-year period of depressed revenues, where lockdown travel restrictions meant very few people were flying.
Higher fuel prices are also dragging on the industry’s recovery and limiting profit margins, but a glimmer of hope shines through as several firms reduce their short positions in UK aviators.
Over July, the amount of shorted shares in Easy Jet dropped by 1.44%, International Consolidated Airlines fell 1.08% and Wizz Air by 0.85%.
This is a positive sign for the industry, but the share prices of each are still significantly lower than they were 12 months ago.
Share price of Wizz Air, easy Jet and International Consolidated Airlines over the past year
Source: Google Finance
Despite a number of setbacks, eToro’s Vettese said that budget airlines will be able to weather the storm, even if revenues take a battering in the short term.
He added: “While there are a myriad of issues facing the sector, we expect low-cost carriers like Wizz to outperform their more premium peers as inflation soars and travellers tighten their belts. That said, a return to profitability in the short-term will be challenging.”
The outlook for some other transport sectors also improved in July, with shorted shares in coach company, National Express, lowering 0.32% after AKO Capital reduced its position in the company.
Although bets against the company declined, its share price is still down 31.9% since the start of the year as higher fuel costs become a larger expense for the company.
Share price of National Express over the past year
Source: Google Finance
Train services remained the same in July despite strike action causing major delays and leaving many customers stranded.
Train unions have caused major disruptions on their mission to increase workers’ pay and conditions, but the number of shorted stocks in Trainline remained the same at 0.7%. That being said, its share price has jumped 40.3% since the start of the year.
Share price of Trainline since the start of the year
Source: Google Finance
Source: Financial Conduct Authority