Investors bet consumer stocks to follow Danone down

Tue Jun 26, 2012 7:24am EDT
 
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By Blaise Robinson

PARIS (Reuters) - Investors are betting European consumer-related stocks will fall further after a profit warning from food group Danone (DANO.PA: Quote) signaled a bigger-than-feared slide in spending in recession-plagued southern Europe.

Shares of companies such as Carrefour (CARR.PA: Quote), Heineken (HEIN.AS: Quote) and Pernod Ricard (PERP.PA: Quote), which have a significant exposure to the euro zone, are in the crosshairs of short sellers, who expect a wave of profit warnings before the second-quarter earnings season.

Last Tuesday, Danone - a stalwart of the French CAC 40 index .FCHI and a defensive safe haven for investors since Europe's debt crisis started in late 2009 - unexpectedly cut its profit margin forecast.

Danone blamed a drop in consumer spending in Spain, where nearly one in four are unemployed, which prompted the maker of Actimel and Activia yoghurts and Evian water to cut prices.

Following the warning, a number of short sellers - who profit from falling stock prices by borrowing shares, selling them, then buying them back more cheaply - are positioning themselves to make a buck out of the deteriorating trend in the consumer-related sectors.

"Profit warnings usually come in a bunch, so with Danone's warning, there's blood in the water," said Derek Lawless, head of ETX Capital France.

According to Markit, which provides securities lending data, short interest in Pernod has risen over the past week, with 4.2 percent of the company's shares out on loan, up from an average of about 2.5 percent over the past few months.

Short interest in Heineken remains relatively low, at 1.1 percent of the company's shares out on loan, but data shows it has also risen over the past week.   Continued...