* Short interest in UK sector up 6.6 pct in a week - Markit
* Morrison, Sainsbury among targets after Xmas updates
* Some investors bet on disappointments from Dixon, Ocado
By Francesco Canepa
LONDON, Jan 15 Speculative sellers are targeting
shares in British retailers, betting on more weak results and
share price falls after a number of disappointing updates on
Despite signs the British economy is improving, several
retailers have failed to benefit as household incomes remain
under pressure and consumers switch to those with the best
Supermarket chains WM Morrison and Sainsbury
have been among the prime targets of investors'
negative bets, after the former reported a sharp fall in like
for like or underlying sales over Christmas, while the latter
cut its 2014 sales growth forecast.
Both have attracted short sellers, who borrow a security and
sell it in the hope of being able to buy it back at a lower
price when the loan is due and thus pocket the difference.
Demand to borrow retail stocks in the FTSE 350 index
of the largest British stocks, a proxy for interest from short
sellers, rose 6.6 percent in the week to Jan. 14, while short
interest in the broader index was flat, Markit data showed.
Around 2.2 percent shares of all retailers' shares are out
on loan, against 1.2 percent for the FTSE 350 as a whole.
Short interest in Morrison and Sainsbury rose 14 percent and
6.1 percent over the week, respectively, while the price of
their shares fell 1.5 percent and 2.3 percent. Around 4.6
percent of Sainsbury's and 5.3 percent of Morrison's shares are
out on loan.
FURTHER TO FALL
Beyond food retail, department store Debenhams and
mother and baby products retailer Mothercare also saw
demand to borrow their shares surge after poorly received
"The fact that these shorts have gone up implies that short
sellers think the shares have further to fall," Alex Brog,
director at Markit, said.
Investors have also positioned for negative updates from
retailers yet to publish Christmas statements.
Europe's No. 2 electricals retailer Dixons Retail,
due to report on Thursday, has seen the proportion of its shares
out on loan double in the past week, although the ratio remains
at a relatively low 2 percent.
Even online retailers Ocado and ASOS,
which could be placed to profit from bricks-and-mortar stores'
misfortunes, saw increases in short interest levels, although
these also remain at around 2 percent.
Shares in fashion retailer ASOS fell on Tuesday when the
group said growth had slowed in two key markets, taking the
shine off a big jump in Christmas sales.
The stock trades on a racy multiple of 107 times forecast
earnings for the year through August, according to Reuters data,
compared with just 12 times for Debenhams for example, making it
vulnerable to even the slightest setback.
Ocado, valued at 164 times forecast earnings, is due to
update the market on Thursday.
(Editing by David Holmes)