20 Underperforming Stocks Targeted By Short Sellers

7. Designer Brands Inc. (NYSE:DBI)

Short interest: 17.14%

6 months’ performance: -50.27%

Designer Brands Inc. operates as a producer, designer, and retailer of footwear and accessories. The company generates revenue through Brand Portfolio, U.S. Retail, and Canada Retail. It provides casual, dress, and athletic footwear and accessories.

For the first time in over two years, the firm reported positive comparable sales. Although sales grew slightly by 1%, it is important to notice that the long downtrend finally reversed. The major driver of this turnaround was the U.S. Retail segment posting a 0.7% growth after so long. Despite sales growth, margins remain a major concern as the growth is mainly coming from the branded athletic footwear segment, which generates significantly lower margins.

The company’s shift towards athletic brands like New Balance and Nike may have lowered overall gross margins, too. It remains in a challenging financial position without solid margin expansion. With debt and annual interest expense amounting to 70 to 80% of its operating income, the short continues to be heavily shorted. A recession could make matters significantly worse.