When most people think of Jos. A Bank Clothiers Inc. (NASDAQ: JOSB), they think about conservative apparel for men’s suits, sports coats, slacks, and dressy-casual attire. It has been around for what seems forever and it targets more traditional clothing that isn’t out of fashion by the next season. But in the world of stock investing, short sellers are almost always active in the stock for a myriad of reasons.
We did a screen in the wee hours of short interest growth in stocks, and for some reason Jos. A. Bank Clothiers just didn’t jump out in the screen. It should have. A reader inquired as to why it wasn’t included in the screen. Usually we go for more active and more widely held stocks, but after looking at this one it’s a pretty amazing number.
The short interest was very high already at the end of February with 11.03 million shares listed in the short interest, and that was up from more than 10.7 million shares in mid-February. But the March 14 short interest was just astounding with 15.19+ million shares being listed in the short interest. NASDAQ cited that based upon about 900,000 per day, that is a day to cover ratio of 16.86. A quick look at Google Finance indicates a float of roughly 18.17 million shares in the float, which is right in line with what the company lists on its own fully diluted as 18.18 million shares.
So 83.5% of the shares outstanding are short. The company had already issued preliminary earnings back on February 7 for its it full fiscal 2007 numbers. Now the company is on a quarterly sales results releasing basis. This stock has been hit by short sellers throughout the years, but shares over the last year have fallen from $45 to under $25 now. Shares are actually at the bottom of what would be a 3-year trading range.
It is hard to know what all these short sellers are expecting to come out of the company. Maybe it is more cautious on sales expectations due to a stretched consumer, maybe it is that they are expecting a weakening balance sheet due to credit or due to merchandise mix. Maybe they are expecting even worse. When you see a short interest that is this large of a percentage of the float it’s hard not to scratch your head. 50% of a float being short is giant, but more than 80% is off the charts.
Options are pricey as well. An at-the-money straddle as a bet on volatility with an April expiration would cost more than $4.30 currently. That’s the sort of volatility pricing you usually see on a biotech stock ahead of an FDA review.
If this company issues any news that is good or just not so bad, calling the short covering action here as being "Spring-Loaded" would be an understatement. Unfortunately the analyst coverage on this stock is rather thin and analyst estimates aren’t uniform. Seeing short interest this large is almost never without reason. But you also rarely see this much of a float as being short.
If we get any word out of the company, we’ll follow up on this one.
Jon C. Ogg
March 27, 2008
Jon Ogg produces the Special Situation Investing Newsletter and can be reached at firstname.lastname@example.org; he does not own securities in the companies he covers.