If a CEO is buying shares in their own company, it’s often worth investigating the stock further. CEOs tend to have an intimate understanding of their businesses and are usually way ahead of analysts when it comes to revenue and earnings trends.
In this report, we are going to highlight a large CEO purchase at Kontoor Brands Inc (KTB:US). Kontoor Brands is a global lifestyle apparel company that owns a number of fashion brands including Lee and Wrangler. The group sells its products primarily through mass and mid-tier retailers, department stores, and e-commerce sites, as well as through direct-to-consumer channels, including full-price and outlet stores, and its websites. It is listed on the New York Stock Exchange and currently has a market capitalization of $3.1 billion.
Kontoor Brands Inc: Insider Buying
Our insider transaction data shows that on 20 August, Kontoor’s President and CEO Scott Baxter bought 10,000 KTB shares at a price of $53.24 per share. This purchase cost the insider $532,400.
30 Years’ Experience in Retail
This trade caught our attention due to its size. Our records show that it is the largest insider purchase at Kontoor Brands for several years. The fact that the CEO has spent over half a million dollars on company stock suggests that he is very bullish on its prospects.
It’s worth noting that Mr. Baxter has considerable company and industry experience. He was appointed as CEO in August 2018 when VF Corporation announced its intention to separate its Jeanswear organization into an independent, publicly-traded company. Prior to this, he served as Group President, Americas West, for VF Corporation where he was responsible for overseeing brands such as The North Face and Vans. Overall, Mr. Baxter has more than 30 years of experience in retail, operations, marketing, merchandising, sales and manufacturing. This means he is likely to have a good read on the industry.
Fiscal Year Guidance Raised
Kontoor Brands recently posted strong second-quarter results that beat its own expectations.
For the period, revenue came in at $491 million, a 41% increase on the same period a year earlier, while adjusted EBITDA was up 433% year on year to $67 million. Adjusted earnings per share was $0.70 compared to a loss of $0.22 per share in the same period in the prior year.
On the back of these strong results, the company authorized a $200 million share repurchase program and raised its full-year fiscal 2021 outlook. It now expects full-year revenue growth in the mid-teens, as compared to a low-teens range in the prior guidance, and adjusted EPS of $3.90 to $4.00 as compared to $3.70 to $3.80 in the prior guidance.
“Kontoor’s strong second quarter results, which came in above our expectations, and our improving fundamentals give us confidence to raise full year guidance. As discussed at our recent Investor Day, we expect to catalyze sustained, profitable growth across channels, categories and geographies, fueled by investments in key enablers within talent, demand creation, digital and sustainability,” commented Mr. Baxter.
In light of these strong results and the raised guidance, we see the insider buying activity here as a bullish indicator.