There are two main reasons insiders invest in their own companies. They either believe that business is about to get better, or that the company is undervalued. Whatever the reason, insider buying tells us that those within the organization expect its share price to rise.
In this report, we are going to highlight some interesting insider buying at Foot Locker Inc (FL:US). Foot Locker is a leading footwear and apparel retailer. Operating in around 30 countries, it has approximately 2,700 stores worldwide. The company is listed on the New York Stock Exchange and currently has a market cap of around $2.47 billion.
Insider Buying at Foot Locker
2iQ’s data shows that on May 30, Foot Locker’s President & CEO Mary Dillon purchased 9,525 shares at a price of $26.20 per share. This trade cost the insider a total of $249,555 and increased her indirect holding to 22,139 shares and total holding to 137,527.
Ms. Dillon has considerable experience in the retail industry. Before joining Foot Locker in 2021, she served as CEO of Ulta Beauty, Inc., the largest beauty retailer in the US, for around eight years. So, she is likely to have a good understanding of her company’s prospects.
It’s worth noting that this isn’t the only large stock purchase from Ms. Dillon recently. In late March, she picked up 12,614 Foot Locker shares at a price of $39.74 per share. So, in the last few months, she has invested around $750,000 in the company.
Share Price Fall
Foot Locker shares recently took a big hit after the company posted its Q1 earnings.
Hurt by both a slowdown in demand and aggressive markdowns on inventory, the company produced top- and bottom-line figures that were lower than expected, with revenue coming in at $1.93 billion versus the forecast of $1.99 billion and earnings per share coming in at 70 cents versus the forecast of 81 cents.
It also trimmed its sales and profit forecasts for the full year. It now expects sales to fall between 6.5% and 8.0% versus previous guidance of a fall of between 3.5% to 5.5%, and gross margin to come in between 28.6% and 38.8% versus previous guidance of 30.8% to 31.0%.
While Foot Locker clearly has a few challenges to work through right now, the stock does look quite interesting from a value investing perspective after the recent fall. With analysts expecting the group to generate earnings per share of $2.98 next financial year, the forward-looking P/E ratio here is just eight – way below the market average.
Clearly, Ms. Dillon sees value at that multiple. We see the insider buying here as a bullish development.