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Home Furnishings Retail Stocks in Short Seller Squeeze

As inflation continues to rise, short sellers have focused on consumer discretionary stocks—including furniture—according to the latest S&P Global Market Intelligence data.

According to the data, short interest in consumer discretionary stocks increased to 5.28 percent in mid-April, up 73 basis points since the start of 2022 and the highest level of short interest in the sector since mid-January 2021. The sector, comprising companies that manufacture goods or provide services that consumers want but don’t necessarily need, was 109 basis points above the healthcare sector, the second-most-shorted sector. Short interest measures the percentage of outstanding shares held by short sellers.

Of the consumer discretionary sector’s sub-categories, home furnishing retail stocks were the most shorted, with a 13.53 percent short interest as of mid-April. Furnishings retail outpaced computer and electronics retail at 12.48 percent, department stores at 11.54 percent, specialty stores at 9.73 percent, and automotive retail at 9.17 percent.

Among the home furnishings retail stocks, Kirkland’s Inc. stood as most shorted at 19.65 percent, followed closely by Bed Bath & Beyond Inc. at 19.24 percent, Sleep Number Corp. at 19.09 percent, Haverty Furniture Cos. Inc. at 18.82 percent, and Williams-Sonoma Inc. at 13.23 percent.

Kirkland’s reported a comp sales decline of 8.5 percent for the fourth quarter of 2021, with an increase in net sales of 2.7 percent and comp sales of 5.6 percent for the year. Bed Bath & Beyond struggled through much of 2021, ending the fourth quarter with comp sales down 12 percent and CFO Gustavo Arnal revealing that comp sales for the first quarter of 2021 were running down approximately 20 percent as of mid-April. And this week, Havertys reported a modest 1 percent increase in first quarter sales and a mere 0.2 percent increase in comp store sales.

Average short interest in the S&P 500 stood at 2.14 percent as of mid-April, the same as the end of March. Short interest in the S&P 500 has dropped recently, down 40 basis points from mid-October 2021.

Analysts pointed to growing inflation, which has hit the home furnishings sector particularly hard, as a driver of short sellers interest in the sector. Continued supply chain disruptions and skyrocketing shipping costs for imports have also impacted the home furnishings market, forcing price increases and shortages or long waits for product.