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In this article, I will feature one grocery store that has seen intensive insider selling during the last 30 days. Intensive insider selling can be defined by the following three criteria:

  1. The stock was sold by three or more insiders within one month.
  2. The stock was not purchased by any insiders in the month of intensive selling.
  3. At least two sellers decreased their holdings by more than 10%.

The Kroger Co. (KR) operates as a retailer in the United States. The company also manufactures and processes food for sale in its supermarkets.

(click to enlarge)

Insider selling during the last 30 days

Here is a table of Kroger's insider-trading activity during the last 30 days by insider.

NameTitleTrade DateShares SoldRule 10b5-1Current OwnershipDecrease In Ownership
Paul HeldmanEVPSep 2680,000No224,104 shares26.3%
Lynn MarmerVPSep 253,675No37,524 shares8.9%
Michael SchlotmanSVPSep 2357,250No156,536 shares26.8%
Robert ClarkVPSep 199,000No36,174 shares19.9%
Pete WilliamsSVPSep 1820,000No79,313 shares20.1%

There have been 169,925 shares sold by insiders during the last 30 days. More details about the Rule 10b5-1 trading plan can be found from this link.

Insider selling by calendar month

Here is a table of Kroger's insider-trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
September 2013169,9250
August 201300
July 2013226,4100
June 201300
May 201300
April 2013114,3000
March 2013266,9500
February 201300
January 201300

There have been 777,585 shares sold and there have been zero shares purchased by insiders this year.

Financials

Kroger reported the second-quarter financial results on September 12 with the following highlights:

Revenue$22.7 billion
Net income$317 million
Net debt$7.7 billion

Outlook

On September 12, Kroger maintained its net earnings guidance range of $2.73 to $2.80 per diluted share for fiscal 2013. This is consistent with the company's long term earnings per share growth rate guidance of 8 - 11%, plus a growing dividend.

Kroger raised identical supermarket sales, excluding fuel, growth guidance to approximately 3.0% to 3.5% for fiscal 2013. The previous guidance was 2.5% to 3.5%.

Competition

Kroger's competitors include Costco (COST), Target (TGT) and Wal-Mart (WMT). Here is a table comparing these companies.

CompanyKRCOSTTGTWMTIndustry Average (Grocery Stores)
Market Cap:21.71B50.61B39.89B243.57B12.88B
Employees:343,000N/A361,0002,200,000151.00K
Qtrly Rev Growth (yoy):0.050.010.020.020.05
Revenue:98.72B105.16B73.48B473.00B44.07B
Gross Margin:0.210.130.300.250.13
EBITDA:4.58B3.92B7.53B36.65B2.23B
Operating Margin:0.030.030.070.060.03
Net Income:1.56B2.04B2.71B17.09BN/A
EPS:3.014.634.155.142.20
P/E:13.8825.0315.2314.5617.76
PEG (5 yr expected):1.601.701.561.583.98
P/S:0.210.480.540.510.34

Kroger has the lowest P/S ratio among these four companies.

Here is a table of these competitors' insider-trading activities this year.

CompanyInsider buying / sharesInsider selling / shares
COST0156,830
TGT0964,576
WMT0186,131

Only Kroger has seen intensive insider selling during the past 30 days.

Conclusion

There have been five different insiders selling Kroger and there have not been any insiders buying Kroger during the past 30 days. Four of these five insiders decreased their holdings by more than 10%. Kroger has an insider ownership of 0.70%.

There are nine analyst buy ratings, three neutral ratings, and two sell ratings, with an average price target of $41.25. Kroger is trading at a P/E ratio of 13.88 and a forward P/E ratio of 13.31. Kroger has a book value of $9.39 per share and the stock has a dividend yield of 1.58%.

Before entering short Kroger, I would like to get a bearish confirmation from the Point and Figure chart. The two main reasons for the proposed short entry are bearish analyst target prices and the intensive insider selling activity.

Source: Insiders Are Selling Kroger