Venator Sheds Its Five-and-Dime Past

Insider buying confirms a number of savvy moves to make over the venerable retailer.
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OK, maybe many of you don't remember the old

Woolworth's

five-and-dimes, much less the days when anything in the store could be had for a nickel or two. But even if you've never seen a soda fountain, you should at least recognize the name, if only for the pain it's caused investors over the past few years. Nor has the point been lost on management: The company dropped the Woolworth name in favor of the unlikely

Venator Group

(Z) - Get Report

.

And yet neither the name change nor the company's subsequent flight from Manhattan's landmark Woolworth building is a particularly big fish in the sea of change at Venator. After all, the company has closed thousands of stores, the majority of them the original Woolworth outlets, in an effort to focus primarily on its sporting-goods market.

Fait accompli:

With more than 6,000 stores -- mainly

Foot Locker

and

Champs Sports

stores -- today's Venator is, for all intents and purposes, a sporting-goods retailer.

Perhaps the only thing that hasn't changed is the pain the stock inflicts on its investors. And I'm not talking about those who suffered the roughly 80% nose dive that began at 26 back in March 1998 and ended at less than 4 in March 1999. I am talking about those who bought into the ensuing rally which petered out at 11 one month later. Those who did not only missed out on a raging bull market, but, depending on where they got in, may have only recently gotten anywhere near back to even.

There may be hope yet. There are a number of reasons for saying this, chief among them being the fact that four Venator insiders purchased a combined 95,800 shares on the open market at prices ranging from 6.81 to 8.25 per share during February and March. Treasurer John Cannon plunked down nearly $300,000 for 38,000 shares. Interestingly, it was only last July that Cannon sold 25,257 shares for just under $270,000. Needless to say, that Cannon recently invested more than he took out less than one year ago is a striking development.

Among the remaining buyers, CFO Bruce Hartman and director Purdy Crawford picked up 35,000 shares and 20,000 shares, respectively. A new filer, VP Robert McHugh, accounted for the balance. What is perhaps most encouraging about the activity is that the insiders began buying at less than 7 and continued to purchase shares even as the stock rose above 8. Apparently these insiders were not waiting for the stock to pull back -- and it hasn't.

Of course, for a company best known for its name changes, reorganizations, cutbacks and charges, Venator's future is far from certain. The stock is certainly not for the sentimental or the faint of heart. In addition to Woolworth's, Venator has already cut loose its

Afterthoughts

and

Kinney

shoe stores. On the block are San Francisco

Music Box

, Foot Locker outlets,

Weekend Edition

and many of its

Burger King

franchises.

For investors concerned that only so much money can be made by cutting costs, Venator just announced a $21.5 million alliance with

America Online

(AOL)

. Under the agreement, not only will

Footlocker.com

products be available on

Shop@AOL

, but the company will also receive broad promotion on AOL's

Sports Channel

, the No. 1 ranked cyberspace sports destination. This could really come in handy should young shoppers' tastes drift back toward athletic footwear, especially now that some of the excess supply has dried up.

According to Venator, excluding the myriad one-time items, the company would have posted fourth-quarter earnings of 12 cents, a penny below the

First Call

mean estimate of 13 cents. Then again, with all the finagling, predicting Venator's earnings is a fool's task. The real issue is whether the company has at last positioned itself to improve going forward. Management has publicly expressed its confidence. The recent insider buys seem to second the motion. Now, if only Wall Street gets on board, maybe Venator can shake the last vestige of its five-and-dime past -- its share price.

In addition to an array of comments (some profane, some otherwise), I've received a number of emails from readers asking specific questions on insider-related issues. Until now, we've been answering them as best we can on a one-off basis. Call me dense, but it wasn't until I received a number of letters asking specifically for a Q&A Forum that it occurred to me just how good an idea this was.

Oddly (perhaps out of a desire to ask only one question at a time), those who have written requesting a Q&A forum have invariably failed to ask a question. So, in response to those and to anybody else with the same idea: By all means

send in your questions. There is no guarantee that we will get to them all, but we'll do our best to address the best and brightest in coming columns.

Bob Gabele has been tracking and analyzing insider trading since 1978, most recently for First Call/Thomson Financial. This column is not meant as investment advice; it is instead meant to provide insight into the methods of insider trading. At time of publication, Gabele held no position in any of the companies discussed in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Gabele appreciates your feedback at

rgabele@thestreet.com.