Analyzing Wednesday's Noteworthy Insider Trades In Consumer And Retail Sectors

Includes: AEO, GLUU, KR, PPC, VRA
by: GuruFundPicks

We present here noteworthy trades in the consumer and retail sectors from Wednesday's (March 14th, 2012) SEC Form 4 (insider trading) filings, as part of our daily and weekly coverage of insider trades. These were selected by a review of over 455 separate SEC Form 4 transactions filed by insiders on Wednesday. The filings are noteworthy based on the dollar amount sold, the number of insiders buying or selling, and based on whether the overall buying or selling represents a strong pick-up based on historical buying and selling in the stock (for more info on how to interpret insider trades, please refer to the end of this article):

American Eagle Outfitters (NYSE:AEO): AEO is an apparel and accessories retailer that operates over a thousand American Eagle Outfitters, Aerie standalone, and 77Kids stores in the U.S. and Canada. On Wednesday, Vice Chairman Roger Markfield filed SEC Form 4 indicating that he exercised options and sold the resulting 200,000 shares for $3.3 million, pursuant to a 10b5-1 plan. This is on top of the sale of 125,646 shares by insiders that we reported over the past weekend, so that insiders reported selling 0.33 million shares in the last few days. In comparison, insiders sold only an additional 5,000 shares in the past year.

AEO reported disappointing Q4 numbers last Wednesday, missing on both earnings (34 cents v/s 36 cents) and revenue ($1.04 billion v/s $1.05 billion), and guiding lower; the stock, however, has surged since the report buoyed by upgrades from brokers, including Nomura, Goldman, FBR Capital, and Caris. Goldman, in particular, pointed to improving margins, led by its teen segment, and a strategic improvement in inventory, and upgraded the stock to a Conviction Buy with a $19 price target; Caris raised the target to $20. AEO shares currently trade at a discount 13-14 forward P/E and 2.2 P/B compared with averages of 16.3 and 3.1 for its peers in the apparel and shoe retail group, while earnings are projected to rise from 86 cents in 2012 to $1.23 in 2014.

Vera Bradley Inc. (NASDAQ:VRA): VRA is engaged in the design, production, marketing and retail of functional accessories for women, including handbags, accessories, and travel and leisure items. On Wednesday, two insiders filed SEC Forms 4 indicating that they sold 0.18 million shares for $7.0 million, pursuant to 10b5-1 plans, with the selling insiders being Directors and 10% owners Patricia Miller (91,432 shares) and Michael Miller (91,432 shares), ending with approximately 7 million shares each after the sale (not including derivative holdings).

VRA reported a strong Q4 yesterday after the market closed, beating analyst earnings (50c v/s 47c) and revenue estimates ($135 million v/s $130 million), but gave mixed guidance going forward. Its shares are down about 10% today, trading at a current 23.6 P/E and 14.5 P/B compared to averages of 17.0 and 2.2 for its peers in the apparel & shoe retail group.

Glu Mobile Inc. (NASDAQ:GLUU): GLUU designs original and third-party licensed mobile games for wireless handsets and social networking websites. On Wednesday, CEO Niccolo De Masi filed SEC Form 4 indicating that he exercised options and sold the resulting 100,000 shares for $0.4 million, pursuant to a 10b5-1 plan, ending with no shares after the sale (not including derivative holdings). In comparison, corporate insiders sold only an additional 4,632 shares in the past six months. In its latest Q4, GLUU beat analyst earnings estimates (2c loss v/s 10c loss) and missed on revenues ($15.2 million v/s $16.9 million); its shares currently trade at 20-21 forward P/E and 5.2 P/B compared to averages of 14.2 and 2.1 for its peers in toys, games and hobby group.

Kroger Co. (NYSE:KR): KR is one of the largest grocery retail chain operators in the U.S., and it also manufactures and processes food for sale in its supermarkets. On Wednesday, two insiders filed SEC Forms 4 indicating that they exercised options and sold the resulting 55,000 shares for $1.3 million. The large majority (50,000) of the shares sold were by SVP Marnette Perry, who ended with 118,676 shares after the sale (not including derivative holdings). In comparison, insiders sold 0.38 million shares in the past year. KR shares have been in a trading range between $20 and $30 for the last five years while earnings have kept steadily rising during that period, and the stock currently trades at a discount 9-10 forward P/E and 2.8 P/B compared to the averages of 13.2 and 2.6 for its peers in the supermarket retailer group.

Pilgrim's Pride Corp. (NYSE:PPC): Colorado-based PPC is the second largest chicken producer in the U.S., with operations in the U.S., Mexico and Puerto Rico. On Wednesday, Pilgrim's founder and Director Lonnie Pilgrim filed SEC Form 4 indicating that he entered into an agreement to sell 18.92 million shares for $107.7 million, which will be finalized March 26, 2012. These shares will be acquired by Brazilian-owned multinational company JBS USA Holdings that is the majority owner of the company, who will then hold 195 million or approximately 75.3% of the outstanding shares after the purchase. With the sale, Mr. Pilgrim will hold only under 3,500 shares of the company. PPC trades at 2.8 P/B and 0.2 PSR (price-to-sales ratio) compared to averages of 0.8 and 0.4 for its peers in the meat products food group.

General Discussion on Insider Trading

The reports in this series identify last week's insider trades of noteworthy significance by sector or industry group, either by virtue of their timing, their size, the number of insiders buying or selling, based on who is buying or selling, or by the trend of their buys and sales over the long-term. The rest of the series by sector and by week can be accessed from our author page.

Credit: Fundamental data in this article were based on SEC filings, Zacks Investment Research, Thomson Reuters and The information and data is believed to be accurate, but no guarantees or representations are made.

Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are our 'opinions' and we may be wrong. We may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to our thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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