If a corporate insider is spending millions on company stock, we think it’s worth taking a closer look. Insiders are some of the most informed participants in the market and their trades can provide valuable investment insights.
In this report, we are going to highlight some large insider trades at Designer Brands Inc (DBI:US). Designer Brands is one of the largest footwear retailers in the US. The company owns the Designer Shoe Warehouse store chain, and operates over 650 stores across North America along with an e-commerce website. It is listed on the New York Stock Exchange and has a market capitalization of $1.02 billion at present.
Designer Brands Inc: Insider Buying
Our records show that between 15 September and 20 September, Designer Brands’ Chairman Jay Schottenstein bought stock on four occasions. In total, the insider picked up 1,667,527 shares at prices of between $12.62 and $13.00 per share, spending roughly $21.5 million on DBI stock.
High Trading IQ
This trading activity stands out for two reasons. Firstly, Mr. Schottenstein has spent a substantial amount of money on DBI stock and increased the size of his position significantly. This suggests he is very confident the stock is undervalued.
Secondly, our data shows that Mr. Schottenstein has a good track record when it comes to timing his purchases and sales well. Last year, for example, he picked up DBI stock when it was trading near $3. Since then, it has risen above $20. Our model gives the insider a long-term Trading IQ of 113, which is excellent.
It’s worth noting that Mr. Schottenstein has a considerable amount of experience in the retail industry and is widely recognized as a respected figure in the industry. Since 2014, he has served as CEO of fashion retailer American Eagle Outfitters. He also served as CEO of American Eagle between 1992 and 2002. Overall, he has more than four decades of experience leading well-known retail brands, many of which are owned by Schottenstein Stores Corporation, a family business established by his grandfather over a century ago.
Designer Brands recently had a ‘record-setting’ second quarter.
For the quarter, net sales came in at $817.3 million, up 67% year on year, while comparable sales were up 85%. Adjusted net income for the period was $43.3 million, versus an adjusted net loss of $94.2 million a year earlier. Adjusted earnings per share came in at $0.56 – well ahead of analysts’ estimates of $0.24.
Looking ahead, CEO Roger Rawlins was confident about the outlook. “We are offering customers the experiences they crave, the speed they demand, and the brands that can rise to those challenges. Given the positive momentum and strength of our strategy, we expect to achieve an adjusted operating income in the second half of fiscal 2021 that will be in-line or slightly better than fiscal 2019 levels," he said.
In light of these strong results and the confident outlook, we see the insider buying here as a bullish indicator.