Hedge Funds Raise Bets Against H&M After Worst Year Since 2000

STOCKHOLM, Sweden — Hennes & Mauritz AB shares plunged 33 percent in 2017, marking their worst year since the beginning of this century. But short trading data shows hedge funds are expecting the Swedish fashion retailer to keep falling.

Short interest in H&M is now above 9 percent of outstanding shares, according to Markit data. A year ago, it was only 4 percent.

Hedge funds betting against the Stockholm-based company include AQR Capital Management, according to data compiled by Bloomberg. So far, they’ve had little reason to regret their positions, with H&M shares already down about 17 percent this year.

H&M is now the most shorted stock on the Swedish benchmark OMXS30 index after Getinge AB, a manufacturer of sterilisation and disinfection products for the healthcare industry.

H&M's chief executive officer, Karl-Johan Persson, says management is working on turning things around.

“We feel confident about online” and with the “new business portfolio,” the chief executive said this month at H&M’s first-ever capital markets day. “I believe in a gradual improvement over the year, first quarter will be weak and then a gradual improvement. Then we’ll see. But we have many improvements in process that have the ability to counteract the shift in the industry.”

But analysts who cover H&M are predicting more declines, with the average price target of estimates collected by Bloomberg falling to 136.4 kronor. That’s about 3 percent below the company’s current share price.

Of the 36 analysts who cover H&M and are tracked by Bloomberg, two have buy ratings. Nineteen are advising clients to sell.

By Niklas Magnusson and Hanna Hoikkala, with assistance from Anna Molin; editor: Tasneem Hanfi Brögger.