Dillard’s, Inc. operates retail department stores primarily in the Southeastern, Southwestern, and Midwestern areas of the United States. Dillard’s is one of United States’s large-cap stocks that saw some insider selling over the past three months, with insiders divesting from 10.50k shares during this period. Generally, insiders selling shares in their own firm sends a bearish signal. The MIT Press (1998) published an article showing that stocks following insider selling underperformed the market by 2.7%. But these signals may not be sufficient to gain confidence on whether to divest. I’ve assessed two potential reasons behind the insiders’ latest motivation to sell their shares.
Check out our latest analysis for Dillard’s
Which Insiders Are Selling?
More shares have been sold than bought by Dillard’s’s insiders in the past three months. In total, individual insiders own over 4.34 million shares in the business, which makes up around 15.72% of total shares outstanding.
Insiders that have recently sold some of their shares are:| Name | Management | Board | Total Annual Compensation |
|---|---|---|---|
| Michael McNiff | |||
| Tom Bolin |
Is Future Growth Outlook As Bearish?
At a very high level, there are dark clouds on the horizon for Dillard’s. Probing further into annual growth rates, Dillard’s is expected to experience decline in top-line growth next year, which could imply some headwinds going forward. This will likely flow through to its earnings next year, illustrated by a highly negative growth expectation, indicating cost-cutting may not be able to pull it through into a positive growth region yet. Selling activities by insiders seem to be consistent with this pessimistic future prospect. Or they may simply deem the current share price is well-above its intrinsic value, providing an opportune time to sell.
Did Insiders Sell On Share Price Volatility?
Alternatively, the timing of these insider transactions may have been driven by share price volatility. Volatility provides an opportunity to trade on market inefficiencies when the stock is under-priced compared to the stock’s intrinsic value. Dillard’s’s shares ranged between $97.51 and $72 over the past three months. This suggests reasonably high share price volatility with a change of 35.43%. This movement could potentially be significant enough to warrant directors to trade their shares. Alternatively, they may simply want to diversify their holdings, distribute stock to investors, or simply require the cash for personal reasons.
Next Steps:
Dillard’s’s net selling activity tells us the stock has fallen out of favour with some insiders as of late, coherent with the poor growth in expected earnings, as well as the relatively large share price volatility over the same period of trade. However it’s crucial to note that insider divesting may have nothing to do with their views on the company’s future performance. Moreover, while insider selling can be a useful prompt, following the lead of an insider, however, will never replace diligent research. there are two relevant aspects you should further research:
- Financial Health: Does Dillard’s have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Other High Quality Alternatives : Are there other high quality stocks you could be holding instead of Dillard’s? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.