Companies bet against Boohoo and ASOS as 2022 revenues fall

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Online retailers Boohoo and ASOS are the UK’s best-selling companies after posting mid-year results that were “nothing short of disastrous”.

Boohoo retained its title as the UK’s best-selling stock in September for the second consecutive month, as short positions in the company hit 10.4%.

The online fashion retailer which owns brands such as PrettyLittleThing, Debenhams and Dorothy Perkins saw the biggest increase in short positions than any other top 10 stock, rising 2.7 percentage points in September.

One company, AHL Partners, removed its 0.8% short position in Boohoo throughout the month, but this was offset by the BG Master Fund and Citadel Advisors, which took positions in the company for a total of 1.6%.

Similarly, the eight companies that already held a position in Boohoo last month increased each of their bets against the company by a collective 1%, suggesting investors are forecasting a bleaker outlook.

Source: Financial Conduct Authority

The sharp rise in shorts came after the company released its mid-year interim results, which showed profits fell 13% and sales fell 10% in the six months to the end of August.

Boohoo expects these revenue declines to persist throughout the year, with its cash profit forecast lowered to between 3% and 5% from a range of 4% to 7%.

Its stock price fell 7.8% when the report was released last week, with its value falling 15.8% in the past month alone. Shares have fallen 69.3% in total so far this year as investors have strayed from the general trend of online shopping that was so thriving during the pandemic.

Boohoo share price in 2022

Source: Google Finance

Derren Nathan, head of equity research at Hargreaves Lansdown, said investors were “weeping in their cornflakes” after reading half-year results as Boohoo failed to ease its supply chain issues.

The opening of its new US distribution center next year could alleviate some of its supply chain issues, but Nathan said it will still be “challenging amid rising cost of living pressures. “.

Hargreaves Lansdown equity analyst Laura Hoy said a sharp rise in inflation could hit Boohoo’s key demographic, young people, the hardest, but the group’s expansion into other brands could diversify its customer base.

She said: “While the group’s appeal to the younger generation remains in question as budgets are stretched, the addition of new brands that cater to different demographics has the potential to bring new growth through the door. .”

Boohoo was not the only online retailer to suffer from restrictions from supply chain bottlenecks and tightening consumer spending in September, with short positions in ASOS rising 0.5 percentage points .

It is the second best-selling company in the UK behind Boohoo, with the number of short positions hitting 7% last month. However, the company’s share price has fallen even more than Boohoo’s this year, down 74.5%.

Charlie Huggins, head of equities at Wealth Club, described the performance of Boohoo and ASOS this year as “nothing short of disastrous”.

ASOS share price in 2022

Source: Google Finance

Among the 10 most shorted companies, investors took the second short position in September in travel company easyJet, as the number of bets against it jumped 1.9 percentage points during the month.

It had 3.3% of its shares short at the start of the month but jumped 21st seat at 8e at the end of September, the positions having increased to 5.2%.

Many commercial airlines were forced to cancel flights throughout the busy summer period due to strikes, but easyJet was particularly exposed at the worst-hit airports, according to Sophie Lund-Yates, equity analyst at Hargreaves Lansdown.

Likewise, the cost of living crisis could also deter consumers from embarking on expensive luxuries such as vacations, as the prices of basic necessities rise steadily.

Nevertheless, of all the commercial airlines, easyJet could be one of the least affected by inflation, as its economy flights could be more attractive to money-conscious holidaymakers.

Lund-Yates said: “As households continue to feel the pinch, we may well see another resurgence of the stay-cation trend seen during the pandemic as families try to save.

“The airlines best prepared to encourage people to fly in these circumstances are those that offer reasonable fares to short- and medium-haul destinations, with the added benefit of flying into more centralized airports, a real sweetener in the easyJet’s toolbox.”

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