Insiders Are Selling Ascena

Oct.17.13 | About: Ascena Retail (ASNA)

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.

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Insider selling during the last 30 days

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

Name Title Trade Date Shares Sold Rule 10b5-1 Current Ownership Decrease In Ownership
Michael Rayden CEO Oct 2-11 202,406 No 4,761 shares 97.7%
Jay Levine SVP Oct 11 40,000 No 5,644 shares + 40,000 options 46.7%
Ronald Robinson President Oct 2 13,859 No 18,586 shares + 83,750 options 11.9%
Gene Wexler SVP Sep 26 40,000 No 333 shares + 20,000 options 66.3%
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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.

Month Insider selling / shares Insider buying / shares
October 2013 256,265 0
September 2013 40,000 0
August 2013 0 0
July 2013 0 0
June 2013 3,266 0
May 2013 0 0
April 2013 0 0
March 2013 40,000 0
February 2013 0 0
January 2013 0 0
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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
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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.

Competition ASNA ARO KSS
Market Cap: 3.10B 705.59M 11.56B
Employees: 14,000 4,205 30,000
Qtrly Rev Growth (yoy): N/A -0.06 0.02
Revenue: 4.71B 2.31B 19.32B
Gross Margin: 0.57 0.31 0.36
EBITDA: 502.10M 86.07M 2.74B
Operating Margin: 0.07 0.01 0.10
Net Income: 155.20M -21.63M 970.00M
EPS: 0.93 -0.28 4.28
P/E: 21.24 N/A 12.44
PEG (5 yr expected): 0.94 -1.13 1.88
P/S: 0.66 0.31 0.60
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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.

Company Insider buying / shares Insider selling / shares
ARO 0 18,352
KSS 5,068 582,764
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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.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.