Insider Weekends: Designer Brands Sees Significant Insider Buying

The trend we mentioned in our last insider weekends article where we discussed increased stock buybacks and insider buying at retail companies is alive and well. The company that topped our list of insider purchases this week is yet another retailer and one that I have followed for several years. Designer Shoe Warehouse (DSW) decided to rename itself Designer Brands and changed its ticker symbol to DBI in April 2019 to reflect the growing stable of brands the company owned or was associated with through a joint venture. The company currently operates over 500 DSW stores in the United States and Canada, 120 The Shoe Company and Show Warehouse stores in Canada and has a stake in The Camuto Group, whose products are sold across 6,400 locations worldwide.

Founded in 1991, Designed Brands went public in 2005 at $19 per share ($9.50 split adjusted). After a big drop during the financial crisis, saw its stock and performance rebound sharply through 2013. Despite an increase in sales every year during the decade preceding the COVID-19 pandemic, operating earnings peaked in fiscal 2015 at $247 million and began a steady decline that saw fiscal 2020 (ended February 2020) operating earnings drop to just $122 million. The stock had already lost nearly half its value to the $15 range before 2020 rolled around and then once again dropped precipitously to $2.60 in March 2020.

Traditional brick-and-mortar retailers were losing market share to both e-commerce companies as well as the discount/wholesale retailers like T.J. Maxx and Costco for the better part of the last two decades and their valuations reflected this shift. Amazon’s acquisition of Whole Foods in 2017 made investors realize that the future for retail was an omni-channel strategy but despite that growing realization traditional retail companies were slow to pivot. An external shock like a pandemic is sometimes necessary to accelerate change and retailers are now going to benefit from an omni-channel environment with e-commerce sales representing more than a tiny fraction of their overall sales.

Designer Brands has been digging itself out of the pandemic related shutdowns and recent revenue and earnings both beat analyst estimates. The company reported fiscal Q2 2022 results that saw the top line increase 67% to $817 million and earnings of 55 cents that beat analyst estimates of 29 cents per share. Same store sales, a key metric for brick-and-mortar retailers, increased 84.9%. Designer Brands now includes e-commerce revenue in its comparable store sales numbers. Comparing results this year to last year’s pandemic impacted quarters is not really equitable but it was encouraging to see that the company expected 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.

Three insiders of the company stepped in and purchased shares near the March 2020 lows including the CEO, the CFO and Mr. Schottenstein but their purchases were not significant and Mr. Schottenstein purchased less than $1 million worth of DBI shares. His confidence appears to have increased significantly since then as he ponied up $12.63 million to buy shares at an average price of $13.99 per share in March 2021 and once again last week. His purchase last week has been his biggest purchase during the last decade. His timing as an insider is notable as he was a seller of the stock from March 2012 to October 2013 and his 2013 sales were at a split adjusted price of over $40 per share. Trading at a forward P/E of 12.31 and a forward EV/EBITDA of 8.65, I can see why Mr. Schottenstein is buying shares at these prices.

Another noticeable trend we have seen recently is insider buying in the oil and gas industry. We reported on insider buying by the CEO of Continental Resources (CLR) last year and also added the stock to our model portfolio. The stock has been the best performer in the model portfolio with gains of 155.75% and it is interesting to see Mr. Hamm was buying shares once again as we reported last week. In addition to his purchases, we saw insider buying in two of the largest energy pipeline companies last week just like we did last year when oil was trading near multi-year lows.

Welcome to edition 586 of Insider Weekends. Insider buying decreased last week with insiders purchasing $81.95 million of stock purchased compared to $87.61 million in the week prior. Selling also decreased to $1.89 billion compared to $3.24 billion in the week prior.

Sell/Buy Ratio: The insider Sell/Buy ratio is calculated by dividing the total insider sales in a given week by total insider purchases that week. The adjusted ratio for last week dropped to 23.02. In other words, insiders sold over 23 times as much stock as they purchased. The Sell/Buy ratio this week was favorable compared to the prior week when the ratio stood at 36.94.

Notable Insider Buys:

1. Designer Brands Inc. (DBI): $13.82

Executive Chairman Jay L. Schottenstein acquired 1,488,933 shares of this shoe retailer, paying $12.82 per share for a total amount of $19.08 million. These shares were purchased indirectly by Jubilee Limited Partnership.

You can view the list of recent insider transactions for Designer Brands Inc. here.

2. Evergy, Inc. (EVRG): $63.15

Shares of this regulated electric company were acquired by 2 insiders:

• EVP – Chief Financial Officer Kirkland B. Andrews acquired 7,875 shares, paying $63.67 per share for a total amount of $501,392. Mr. Andrews increased his stake by 55.40% to 22,091 shares with this purchase.
• President and CEO David A. Campbell acquired 7,850 shares, paying $63.66 per share for a total amount of $499,699. Mr. Campbell increased his stake by 12.26% to 71,904 shares with this purchase.

You can view the list of recent insider transactions for Evergy, Inc. here.

3. United Insurance Holdings Corp. (UIHC): $3.48

Shares of this property and casualty insurance holding company were acquired by 3 insiders:

• Chief Underwriting Officer Brooke Shirazi acquired 100,000 shares, paying $3.15 per share for a total amount of $314,869.
• Director Alec Poitevint acquired 73,862 shares, paying $3.29 per share for a total amount of $242,779. These shares were purchased indirectly by various entities.
• President & CFO Brad Martz acquired 7,500 shares, paying $3.37 per share for a total amount of $25,275. Mr. Martz increased his stake by 11.12% to 74,945 shares with this purchase.

You can view the list of recent insider transactions for United Insurance Holdings Corp. here.

4. Enterprise Products Partners L.P. (EPD): $21.45

Co-Chief Executive Officer Aj Teague acquired 24,300 shares of this midstream energy services provider, paying $21.42 per share for a total amount of $520,515. Mr. Teague increased his stake by 1.14% to 2,156,416 shares with this purchase. These shares were purchased indirectly by Mr. Teague’s spouse.

You can view the list of recent insider transactions for Enterprise Products Partners L.P. here.

5. Energy Transfer LP (ET): $9.28

Director Richard D. Brannon acquired 44,000 shares of this energy-related services provider, paying $9.18 per share for a total amount of $403,880. Mr. Brannon increased his stake by 53.29% to 126,574 shares with this purchase.

You can view the list of recent insider transactions for Energy Transfer LP here.

You can view the full list of purchases from this Insider Buying page.

Notable Insider Sales:

1. Alphabet Inc. (GOOG): $2852.66

Director Lawrence Page sold 55,556 shares of Alphabet for $2799.09, generating $155.51 million from the sale.

You can view the list of recent insider transactions for Alphabet Inc. here.

2. MP Materials Corp. (MP): $34.15

Shares of this industrial metals & mining company were sold by 3 insiders:

• Chairman and CEO James H. Litinsky sold 3,154,388 shares for $34.62, generating $109.2 million from the sale. These shares were sold indirectly by various entities.
• Director Daniel Allen Gold sold 1,095,612 shares for $34.62, generating $37.93 million from the sale. These shares were sold indirectly by various entities.

You can view the list of recent insider transactions for MP Materials Corp. here.

3. Facebook, Inc. (FB): $352.96

Shares of Facebook were sold by 2 insiders:

• COB and CEO Mark Zuckerberg sold 386,500 shares for $359.06, generating $138.78 million from the sale. These shares were sold indirectly by various entities.
• Chief Legal Officer Jennifer Newstead sold 250 shares for $358.70, generating $89,675 from the sale.

You can view the list of recent insider transactions for Facebook, Inc. here.

4. Walmart Inc. (WMT): $143.17

Shares of Walmart were sold by 2 insiders:

• Director Robson S. Walton sold 692,000 shares for $143.06, generating $99 million from the sale. These shares were sold indirectly by a trust.
• President and CEO Douglas C. McMillon sold 9,708 shares for $143.27, generating $1.39 million from the sale.

You can view the list of recent insider transactions for Walmart Inc. here.

5. Intercontinental Exchange, Inc. (ICE): $119.74

Chief Executive Officer Jeffrey C. Sprecher sold 169,037 shares of this financial data & stock exchanges company for $117.03, generating $19.78 million from the sale. 89,537 of these shares were sold as a result of exercising options immediately prior to the sale.

You can view the list of recent insider transactions for Intercontinental Exchange, Inc. here.

You can view the full list of sales from this Insider Sales page.

The list of all insider purchases and sales by management people is only available to InsideArbitrage Premium and Plus members.

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