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In this article, I will feature one apparel 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%.

Ascena Retail Group (NASDAQ:ASNA) operates as a specialty retailer of apparel for women, and tween girls and boys.

(click to enlarge)

Insider selling during the last 30 days

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

NameTitleTrade DateShares SoldRule 10b5-1Current OwnershipDecrease In Ownership
Michael RaydenCEOOct 2-11202,406No4,761 shares97.7%
Jay LevineSVPOct 1140,000No5,644 shares + 40,000 options46.7%
Ronald RobinsonPresidentOct 213,859No18,586 shares + 83,750 options11.9%
Gene WexlerSVPSep 2640,000No333 shares + 20,000 options66.3%

There have been 296,265 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 Ascena's insider-trading activity by calendar month.

MonthInsider selling / sharesInsider buying / shares
October 2013256,2650
September 201340,0000
August 201300
July 201300
June 20133,2660
May 201300
April 201300
March 201340,0000
February 201300
January 201300

There have been 339,531 shares sold and there have been zero shares purchased by insiders this year. The month of October has seen the most insider selling this year.

Financials

Ascena reported the fiscal 2013 full-year, which ended July 27, financial results on September 24, with the following highlights:

Revenue$4.7 billion
Net income$151.3 million
Cash$189.4 million
Debt$135.6 million

Outlook

Ascena's guidance for adjusted earnings per diluted share from continuing operations for the fiscal year ending July 2014 is in the range of $1.25 to $1.30.

Competition

Ascena's competitors include Aeropostale (NYSE:ARO) and Kohl's (NYSE:KSS). Here is a table comparing these companies.

CompetitionASNAAROKSS
Market Cap:3.10B705.59M11.56B
Employees:14,0004,20530,000
Qtrly Rev Growth (yoy):N/A-0.060.02
Revenue:4.71B2.31B19.32B
Gross Margin:0.570.310.36
EBITDA:502.10M86.07M2.74B
Operating Margin:0.070.010.10
Net Income:155.20M-21.63M970.00M
EPS:0.93-0.284.28
P/E:21.24N/A12.44
PEG (5 yr expected):0.94-1.131.88
P/S:0.660.310.60

Ascena has the highest P/S ratio among these three companies, which could explain some of the insider selling.

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

CompanyInsider buying / sharesInsider selling / shares
ARO018,352
KSS5,068582,764

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

Conclusion

There have been four different insiders selling Ascena and there have not been any insiders buying Ascena during the past 30 days. All four of these insiders decreased their holdings by more than 10%. Ascena has an insider ownership of 13.80%.

Ascena is trading at a P/E ratio of 21.24 and a forward P/E ratio of 12.71. Ascena has a book value of $9.82 per share.

Before entering short Ascena, I would like to get a bearish confirmation from the Point and Figure chart. The two main reasons for the proposed short entry are relatively high P/S ratio and the intensive insider selling activity.

Source: Insiders Are Selling Ascena