Hedge funds build up bets worth over £1 billion against some of the biggest names in British retail
Hedge funds have built up bets worth over £1 billion against some of the biggest names in British retail — amid fears of more pain to come.
Despite the cost of living crisis, British retail sales have held up much better than expected.
However, analysis of the financial watchdog’s register by The Sun shows hedge funds are taking a more pessimistic view.
If an investor is cynical about a company’s fortunes, it can bet against it by shorting the shares.
This is done by borrowing shares in a firm, selling them, and buying them back for a lower price once the shares have fallen — in order to pocket the difference as profit.
The role of short-sellers in the run-up to the 2008 financial crisis was famously explained by Margot Robbie in a bathtub in the film The Big Short.
Many hedge funds bets are against so-called “pandemic winners”, who enjoyed a surge in sales in lockdowns but are suffering as shopping habits return to normal.
B&Q owner Kingfisher continues to be the most shorted company as investors bet cash-strapped consumers will continue to pull back spending on DIY projects.
Kingfisher made a record £1 billion in profit in lockdown, but warned last month it will make less than half, £490 million, this year.
Online fast-fashion retailers Asos and Boohoo boomed during lockdowns as shoppers couldn’t get to the high street but still wanted new outfits for their social media lives.
Asos is expected to report an 18 per cent slump in sales on Wednesday. Ocado has 5.5 per cent of shares out on loan to short sellers.
Meanwhile, hedge funds are still betting £207 million against Sainsbury’s, despite recent strong sales.
Primarked down kit
Primark is slashing kids’ clothes prices as the low-cost retailer passes on the benefits of falling inflation.
A full baby outfit has been lowered to £4.60 compared to £8 a year ago.
Inflation on clothing hit a high of 9.8 per cent last March but has fallen to five per cent, according to the Office for National Statistics.
Primark parent company Associated British Foods is one of the few retailers not targeted by hedge funds, see story above.
Recruit jobs go in slump
PageGroup has been firing workers because hiring has become harder.
The recruitment firm has axed a further 100 roles, equivalent to 1.7 per cent of its workforce — on top of cutting 1,000 jobs last year.
Shares in PageGroup fell by almost ten per cent yesterday as the company said it had continued to see a “deterioration” in job flow towards the end of March.
PageGroup has suffered falls in all areas but been hit the hardest in the UK where fee income fell by 19.2 per cent in the year’s first three months.
Overall, PageGroup posted a 12.8 per cent slip in gross profits to £219.7 million.
Russ Mould, analyst at AJ Bell, said: “It will be of particular concern to the firm’s shareholders that temporary hires are now also coming under pressure.
“Retrenchment in part-time posts is a potentially troubling sign.”
Inch has US pinch
Car dealership firm Inchcape is offloading its entire UK business to a US buyer in a £346 million deal.
The London-listed firm has confirmed it is selling all 80 dealerships, which employ 3,600 people, to US rival Group 1 Automotive.
The exit allows Inchcape to focus on its more profitable overseas divisions. The UK arm made £2 billion of revenues, 18 per cent of group sales, but just seven per cent of profits.
CVC goes Dutch
One of the world’s biggest private equity firms, CVC Capital Partners, yesterday revealed plans to raise £1 billion in its much-anticipated stock market listing.
CVC owns tea brand PG Tips, campsite chain Away Resorts, Breitling watches and a stake in Six Nations Rugby.
Its decision to go for a flotation in Amsterdam, after delaying in November, delivers another blow to the London Stock Exchange.
CVC joins rivals Apollo, Blackstone, Bridgepoint and KKR as a listed company.
Just one in four full-time occupations have seen their hourly rates keep up with inflation over the last three years, according to HR software firm CIPHR.
Hospitality workers, those in public relations and fire officers have seen the biggest increases.
In deep trouble
Thames Water has less than two months to come up with a survival plan that is acceptable to both the regulator and its investors.
Ofwat yesterday confirmed that it will issue its draft decision on Thames Water’s turnaround plan on June 12.
The firm has said that it needs to raise more cash to invest in fixing leaks, but its investors refused to put more in after Ofwat blocked plans to hike bills by 40 per cent.
Thames’ owner, Kemble Water, has already defaulted on a debt repayment.
SHARES
- BARCLAYS up 0.28 to 183.14
- BP down 11.80 to 527.30
- CENTRICA down 2.80 to 130.50
- HSBC down 2.30 to 651.10
- LLOYDS up 0.18 to 51.16
- M&S down 1.20 to 254.20
- NATWEST up 2.30 to 276.80
- ROYAL MAIL up 1.80 to 227.20
- SAINSBURY’S down 1.20 to 260.40
- SHELL down 47.50 to 2,889.50
- TESCO up 3.40 to 286.30