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Why Wolf Hill Capital is Bearish on Stage Stores (SSI) stock?

Wolf Hill Capital Management, LP is the management company of the Wolf Hill Partners fund. Insider Monkey has recently published a copy of Wolf Hill Capital’s Q1 2020 investor letter. A copy of the letter can be downloaded here. Gary Lehrman is the fund’s founder and managing member. For Q1 2020, the fund reported a net return of -10.13%, while the S&P 500 returned -20.94%.

In the said letter, Gary Lehrman highlighted a few stocks and Stage Stores Inc (NYSE:SSI) is one of them. Stage Stores is a department store which specializes in retailing off-price brand name apparel, cosmetics, footwear, accessories,  and housewares. Year-to-date, SSI stock lost 95.8% and on April 22nd it had a closing price of $0.3381. Its market cap is of $9.92 million. Here is what Gary Lehrman said:

“In November we had initiated a position in Stage Stores, a traditional department store company that was attempting to transform itself into an off-price chain, competing against the likes of Burlington Stores & Ross Stores in offering discounted merchandise at rock-bottom prices in what is known in the industry as a “treasure hunting” experience. Over the years, this business model has proven to be relatively Amazon-proof and we had reason to believe that Stage’s transformation was in the early innings of beginning to bear fruit. Despite monetizing significant gains on half of our position in December, the announcement of disappointing sales for the all-important holiday shopping season caused the stock to crater. In response to this news, we immediately sold the balance of our position, avoiding what could have been an even larger problem. Overall, we eked out an insignificant 25 basis point gain on the Stage Stores position, but the position unfortunately detracted 2.76% from January’s performance.”

In Q3 2019, the number of bullish hedge fund positions on SSI stock increased by about 20% from the previous quarter (see the chart here).

Disclosure: None. This article is originally published at Insider Monkey.

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