What happened
Shares of apparel company Guess? (GES +0.00%) traded sharply higher on Tuesday, after a filing with the Securities and Exchange Commission revealed the company's CEO boosted his ownership stake. As of 12:15 p.m. EDT, the stock was up a whopping 17%.
So what
Guess? CEO Carlos Alberini already directly owned over 500,000 shares of company stock. And he indirectly owned almost 350,000 shares through trust accounts. But on July 16, he bought 100,000 additional shares for his Carlos and Andrea Alberini Trust account.
Image source: Getty Images.
That's nearly 1 million shares of Guess? stock owned by Alberini -- a man who has a fantastic insider view of the company. Increasing his stake now strongly suggests results are improving behind the scenes. And Alberini paid an average of $10.17 per share, which implies he thinks it's a great price to significantly increase his stake.
Guess? stock is still down more than 50% in 2020. The continued underperformance reflects the dismal first-quarter results the company reported in June. Q1 revenue was down 52% because of COVID-19, resulting in a massive $2.40 loss per share. This caused management to suspend its dividend to preserve cash as it waits for its business to improve.
Now what
Perhaps Alberini is seeing enough improving sales trends to inspire him to buy 100,000 shares. But that's just speculation. Investors likely won't know for sure until Guess? reports second-quarter earnings.
For now, shareholders should be encouraged to see the CEO's financial interests aligned with theirs. Alberini now has more incentive to make shareholder-friendly decisions, since it directly benefits himself as well.
