Short Sellers Bet on Sainsbury, Morrison While?Tesco Jumps

by Inyoung Hwang

(Bloomberg) — Last year was the worst on record for U.K. grocer stocks. Short sellers are betting it won?t stop there.

Rivals have siphoned off market share from J Sainsbury Plc and William Morrison Supermarkets Plc, sending both stocks tumbling more than 29 percent in 2014 and making them the most-shorted companies in the FTSE 100 Index, data compiled by Bloomberg show.

Adding to obstacles, the lowest U.K. inflation on record has hindered grocers? ability to boost revenue. New management, turnaround plans and rebounds in holiday sales might not be enough to counter a broader consumer shift to German discounters Aldi and Lidl, says Morningstar Inc.?s Ken Perkins.

?The shorts will be proven right if the Christmas period was an anomaly,? said Perkins, a Chicago-based analyst at Morningstar. ?It?s not clear traditional U.K. grocers are out of the woods yet, especially in terms of the competitive pressures.?

Short interest is 14 percent of both Sainsbury?s and Morrison?s shares outstanding, according to data compiled by London-based research firm Markit. Sainsbury shares have gained 9.3 percent this year, while Morrison slipped 0.8 percent.

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