Hedge funds, including Marshall Wace, Man Group GLG, and AQR Capital, are ramping up short positions against Sainsbury’s as concerns mount over declining sales at Argos, its non-food retail arm, according to a report by the Telegraph.

Short interest in Britain’s second-largest supermarket has surged to 6% of its outstanding shares, the highest level since August 2021 and double the level at the start of January.

Marshall Wace, co-founded by Sir Paul Marshall, is among the hedge funds increasing short bets, according to regulatory filings. US-based AQR Capital, led by billionaire Cliff Asness, and Man Group have also positioned against the retailer.

Sainsbury’s shares have already declined more than 9% in 2024 and are down nearly 20% since September, reflecting investor pessimism.

Analysts point to weak consumer sentiment as a key driver of hedge funds’ negative outlook.

Argos, which sells items such as electronics, toys, and furniture, has been particularly vulnerable as consumers cut back on non-essential purchases, with sales at Argos declining 1.4% in the three months to 4 January, in contrast to a 4.1% rise in Sainsbury’s grocery business. The company attributed the weakness to a soft toy market and subdued demand for furniture and electronics.

Hedge funds shorting Sainsbury’s are also betting against Kingfisher, the owner of B&Q and Screwfix, which is similarly exposed to discretionary spending downturns. Short interest in Kingfisher now stands at 6.3%, making it one of the most shorted stocks on the London Stock Exchange.