It has been revealed this morning that a long term director of Accent Group Ltd (ASX: AX1) has recently sold over $2 million in company shares. Is this a bad sign for future share price performance?
What Does Accent Group Do?
Accent Group is a footwear retailer that was founded in 1981. It is best known in Australia for its network of The Athlete’s Foot stores. It now operates a variety of footwear & fashion chains including Platypus, Skechers, Hype, Vans, Timberland, Merrell and Dr Martens.
Director Sells Down
Michael Hopwood, long term Non-Executive Director, has recently sold a total of 1,243,786 shares at an average price of $1.662, which amounts to $2.07 million.
It’s important that when insiders sell shares, we as investors do not automatically panic. There are plenty of reasons why insiders might choose to sell and many of these may have nothing to do with the ongoing business performance. Buying a new house, paying for children’s education expenses or any number of other major expenses may be behind a reason for selling.
Before jumping to conclusions, you should also look to see if the person selling still maintains a significant amount of shares in the business. In this case, Mr Hopwood still holds just under 13 million shares, meaning he has sold less than 10% of his shareholding. When we put this into context, I think everyone could agree that it is really not a big deal. As such, this can act as a reminder to always look beyond the headline figures.
Why Are Accent Shares Trading Lower?
The Accent Group share price was trading down as much as 3.5% this morning, however, this is more likely due to the shares trading ex-dividend today. This basically means that as of today, any new buyers would not be entitled to the final dividend which was declared in August. In theory a company’s share price should trade lower by the amount of the dividend to be paid which is 3.5 cents in the case of Accent.
The Rask Finance video below explains dividends and the concept of ex-dividend in more detail:
Where To From Here?
Accent is a quality retailer and possesses a number of strong brands. The share price has been an impressive performer in 2019, up more than 40% since the start of the year.
The retail space is a tough spot to be in with online shopping destroying mall traffic, however Accent has been successfully growing its online sales platform and also benefits from the fact that shoes tend to be one of those products that people like to try before they buy so to speak. As a result, consumers still tend to go into their stores more so than other retailers.
I have owned shares in Accent before and I wouldn’t rule out doing so again sometime in the future. However, I would only do so at what I perceive to be a steep discount to my estimate of intrinsic value. The retail space is just too fickle and with almost non-existent wage growth and subdued consumer sentiment, I think the difficult trading environment will continue for some time yet.
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At the time of publishing, Luke has no financial interest in any companies mentioned.
