Shoe Retailer CCC Faces Scrutiny Afterโ Short Seller Report, Shares Dip
Shares of CCC, a major European shoe retailer, fell 15 percent following aโ report by Ningi, โขa researchโ firm, alleging artificiallyโ inflated sales. The โreport claims CCC boosted sales by approximately 330 million zlotys ($91 million) through transactions with related parties, masking “deep operational and strategic โweaknesses.” Ningi โalso disclosed it had taken a short positionโ in CCC shares, meaning it profits ifโ the stock price declines.
Short selling carries notable risk; unlike conventional investing where losses are limited to the initial deposit, short sellers can โฃface perhaps unlimited losses ifโค the stock price rises. forโฃ example,if a short seller is forced to โbuy back shares at a higher price than they initiallyโฃ sold them for,substantial โlosses โขcan occur. The text illustrates โthis with a hypothetical example: buying back 1000 shares for $150 million after initially selling them, resulting in a $50 million loss.
According โฃto the Polishโค financial regulator’s registry,short positions in CCC shares represented 5.8 percent โฃof shares outstanding. These “shorting”โข activists investigate companies andโ aim to profit from negative news โimpacting stock prices.
However, some analysts downplayed the significance of Ningi’s findings. Lukasz Wachelko of Wood & Co.โค told Bloomberg that theโฃ disputed sales represent a small fraction of CCC’s total โขsales ofโค 10.7 billion zlotys inโ the โ12 months โขendingโค July 31st.โ He believesโข the report is “too alarmist” and that the market should stabilize โคif CCC provides a comprehensive description.
This isn’t the first time a Polish-listed company has been targeted by a short seller. In 2023, shares of clothing company LPP (owner of brands like Reserved and โSinsay) fell 36 percent after Hindenburg Research accused the โขcompany ofโค “fraud”โค regarding itsโค withdrawal fromโ Russia. It took until the following month for LPP’s share price to recover to pre-report โlevels, despite the company strongly denying the allegations.
CCC โคwas founded โby Dariusz Milek in โข1996 and has grown intoโ one of Europe’s largest shoe retailers, operating approximately 1,200 stores across 23 countries. Milek stepped down as executive director in 2019, joining the supervisory board beforeโ returning to โฃlead the companyโฃ in mid-2023. He inherited a business struggling with an overextendedโค expansion into Germanyโค and the lingeringโ effects of the COVID-19 pandemic. โคInstead ofโฃ cost-cutting, Milek focused on capitalizing on demand from price-sensitive consumers in Eastern Europe for branded goods with higher โคmargins.
This strategy appears to โขhave been accomplished, with CCC shares risingโข 201 percent in 2024 and rejoining Warsaw’s WIG20 benchmark stock โขindex in March after a two-year absence.
