The Consumer Staples Select Sector SPDR ETF (XLP) was trading as low as $19.28 in March 2009. The index is currently trading at $40.29 or 109.0% above the low made in March 2009.
In this article, I will feature one consumer stock that has seen intensive insider buying during the last 30 days. Intensive insider buying can be defined by the following three criteria:
The stock is purchased by three or more insiders within one month.
The stock is sold by no insiders in the month of intensive purchasing.
At least two purchasers increase their holdings by more than 10%.
Liquor Stores (GM:LQSIF) currently operates 246 retail liquor stores in Alberta, British Columbia, Alaska and Kentucky.
Liquor Stores was trading as low as $8.77 in December 2008 and is currently trading at $15.98 or 82.2% above the low made in 2008. With the dividends, Liquor Stores' share performance is in line with the Consumer Staples Select Sector SPDR ETF.
Insider buying by insider (last 30 days)
- Stephen Bebis purchased 4,900 shares on August 14 and currently holds 4,900 shares or less than 0.1% of the company. Stephen Bebis is President and Chief Executive Officer of the company.
- Henry Bereznicki purchased 1,500 shares on August 14 and currently holds 31,500 shares or 0.1% of the company. Henry Bereznicki serves as a director of the company.
- Patrick de Grace purchased 1,500 shares on August 13 and currently controls 9,732 shares or less than 0.1% of the company. Patrick de Grace is Senior Vice President and Chief Financial Officer.
- David Gordey purchased 1,300 shares on August 13 and currently holds 2,000 shares or less than 0.1% of the company. David Gordey is a senior officer of the company.
- Robert Green purchased 5,000 shares on August 13 and currently holds 10,000 shares or less than 0.1% of the company. Robert Green serves as a director of the company.
Insider buying by calendar month
Here is a table of Liquor Stores' insider-trading activity by calendar month.
|Month||Insider buying / shares||Insider selling / shares|
There have been 27,696 shares purchased and there have been 427,257 shares sold by the insiders since March 2013.
The company reported the second-quarter financial results on August 6 with the following highlights:
|Net income||$5.3 million|
While Liquor Stores' management expects sales in the remainder of 2013 to increase compared with 2012 as a result of an increase in the number of stores in 2012 and new stores that will be added in 2013, Liquor Stores' financial results for the remainder of 2013 and into 2014 may face pressure from certain uncontrollable factors including:
1. The potential for slower economic growth, with particular emphasis on Alberta as a result of the uncertainty in the energy sector, and
2. Increased competition from retail liquor stores that opened in counties in Kentucky that went from 'dry' to 'wet' throughout 2012. In addition to these factors, there is the potential for changes to the licensing regime in Kentucky during 2013 or 2014, which could have a negative impact on Liquor Stores' operations and financial results in Kentucky if these changes are implemented.
Liquor Stores anticipates that the rate of store growth in 2013 will slow compared to 2012, and then will accelerate starting in 2014.
Generally, new stores take three years to reach maturity and fully contribute to operating margin. As a result, over the next 12 to 24 months, operating and administrative costs are expected to trend higher and operating margin as a percentage of sales may decline.
Liquor Stores' management believes that cash flow from existing operations and its available credit are sufficient to finance the company's growth plans and sustain its dividends at the current level.
The private retail distribution of alcoholic beverages in the Provinces of Alberta and British Columbia and the States of Alaska and Kentucky is both competitive and fragmented. Competition exists mainly on a local basis with the main competitive factors being location, convenience, price and service.
In Alberta, Liquor Stores competes with other local single store operators, other local and regional chain operators, and liquor stores associated with national and regional grocery store chains. The current regulatory regime in Alberta limits certain of the potential competitive advantages of large scale retailers by, among other things, requiring liquor stores to be operated as a separate business and prohibiting the sale of liquor in stores selling other goods and by requiring all retailers to pay the same wholesale price and a uniform "postage stamp" delivery charge. Liquor Stores' competitors in Alberta include Costco (COST), Safeway (SWY), Sobeys, and Superstore. Costco has seen 16 insider sell transactions this year. Safeway has seen eight insider sell transactions and two insider buy transactions this year.
In British Columbia, Liquor Stores competes with government owned and operated liquor stores, local independent stores, and wine stores. In February 2010, the British Columbia government amended certain liquor control and licensing regulations, including an amendment that increased the relocation distance such that a retail liquor store is not permitted to be relocated anywhere within 1.0 kilometer of an existing retail liquor store, or the site of an application to license a new retail liquor store (subject to certain "grandfathering" exceptions). This arrangement limits the number of entrants who are able to enter into the market.
In each of Alaska and Kentucky, Liquor Stores competes with local single store operators, other local and regional chain operators and liquor stores associated with U.S. national grocery store chains (and in some instances in Kentucky, with U.S. national drug store chains who also offer alcoholic products for sale). Under the Alaska and Kentucky regulatory environments, stores purchase product directly from distributors and are able to negotiate large volume discounts with suppliers; as such, competitors with greater financial resources are able to maintain a competitive advantage over smaller operators.
Liquor Stores' competitors in Alaska include Costco, Sam's Club, Wal-Mart (WMT) and Fred Meyer. Liquor Stores' competitors in Kentucky include Kroger (KR), Meijer, Sam's Club, Costco, Wal-Mart, Walgreen (WAG), Rite Aid (RAD), and CVS Caremark (CVS). Wal-Mart has seen five insider sell transactions this year and Kroger has seen 24 insider sell transactions this year. Rite Aid has seen intensive insider selling in July and CVS Caremark has seen three insider sell transactions this year. Walgreen has seen six insider sell transactions and two insider buy transactions this year.
There have been five different insiders buying Liquor Stores and there have not been any insiders selling Liquor Stores during the last 30 days. Four out of these five insiders increased their holdings by more than 10%. Liquor Stores is trading at a P/E ratio of 19.51 and the stock has a dividend yield of 6.76%. Liquor Stores has a book value of $14.06 per share, which I believe could be a good entry point for the stock.