Truworths said on Monday that its CEO, Michael Mark, sold R28m worth of shares last week, in addition to R36.4m two weeks ago and another R19m in early September.
This brings the value of the shares Mark has sold in the past six weeks to more than R83m.
Some investors and company analysts watch the share sales of directors, because they have detailed knowledge of a company’s revenue and profit and may choose a time to sell shares when they think the price is at a high or good value.
Truworths directors, other than Mark, sold shares worth more than R30m in early October.
Many senior staff were awarded shares in September as part of long-term bonuses thanks to meeting multiyear performance targets.
The company said the subsequent sales were to enable the CEO or directors to repay loans and/or pay the tax required as long-term shares vested.
As directors must pay high levels of tax on what they earn, including shares, many will sell some of these to meet tax obligations.
Sasfin analyst Alec Abraham said: “The fact that such large amounts of shares had to be sold for tax and the other reasons given probably speaks to the large number and lucrative share options granted over time.”
But sales, which could also be for personal reasons, may signal that directors think the share price has peaked or is about to.
Purchases of shares often reveal that directors believe the share price could rise and are seen as a sign of faith in a company, while continued sales could mean the price could drop.
The Truworths share price is up 35% in the year to date, possibly making it an attractive time to sell.
Most shares were sold by directors and some by Mark at a volume-weighted average price of R76.70, with a high R76.75 and low of R76.50. Truworths started the year with the share price at R56.
Woolworths directors also sold more than R53m in shares in September as shares vested and tax obligations became due.
The question these share sales raise is whether fashion retail share prices were at a high recently and are likely to drop in value soon as consumers spend less and bad debt rises.
Truworths, for example, sells 70% of local goods on credit. Analysts are watching closely to see if the number of accounts in arrears rises as customers face financial pressure.
Woolworths sold slightly less apparel and shoes in its 2023 year than in 2022 as customers cut back.
The weak economy, sustained load-shedding, high petrol prices and high interest rates continue to dent demand for discretionary goods as consumers spend on essentials such as food and transport instead of fashion.
Chinese online retail giant Shein is undercutting SA retailers that manufacture locally. Shein posts very low-cost fashion items to customers, with the money therefore diverted from the local economy.
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