Bonuses across the financial industry are taking a knock this year, and many one-percenters are finding themselves in awkward financial situations. (STAY AHEAD OF THE CURVE: Follow Kapitall on Twitter)
“People who don’t have money don’t understand the stress,” explains Alan Dlugash, a partner at accounting firm Marks Paneth & Shron LLP in New York in an interview with Bloomberg. “Could you imagine what it’s like to say I got three kids in private school, I have to think about pulling them out? How do you do that?”
Due to the drop in revenues from investment banking and trading, Wall Street’s cash bonus pool fell 14% to $19.9 billion the greatest decrease since 2008. For the last two years total bonuses have averaged $22 billion.
The average bonus fell nearly $18,000 to $121,000, reports CNNMoney. “This estimate tracks cash payments and doesn’t include stock options or other forms of deferred compensation that haven’t been realized.”
“It’s a disaster,” said Ilana Weinstein, chief executive officer of New York-based search firm IDW Group LLC. “The entire construct of compensation has changed.” (via Bloomberg)
High-income earners are not used to taking a cut and don’t typically save for rainy days. When their salaries are slashed, they “feel stuck.” And high earners typically live expensive lifestyles that include second homes, fancy vacations, high-wage nannies, dog walkers, and expensive brownstones. A lower income therefore requires greater cutbacks, and Wall Street workers are concerned over how best to maintain the lifestyle they and their families have come to expect.
High-End Retailers Should Brace for Impact
Alan Dlugash (an accountant) is spending more time with his Wall Street clients to discuss their expenses. He’ll tell them: “You don’t necessarily have to cut that — but if you don’t cut that, then you’ve got to cut this.’ They say,’But I can’t.’ And I say, ‘But you must.’”
It’s very likely the cutbacks on Wall Street will be felt most by the luxury markets. As a point of fact, nearly 30% of the U.S luxury markets revenues come from New York City, and most of that from Wall Street.
Business Section: Investing Ideas
When it comes down to it, Wall Street is a driver of demand in New York City’s luxury market, from luxury cars and private jets to high-end restaurants and jewelry companies. If Wall Street suffers, the spillover can be quite overwhelming. Naturally, waves of layoffs and the anticipation of pay cuts can easily rattle the industry’s earning expectations.
We decided to take a look at some of the luxury companies trading on the US stock exchanges that have a significant exposure to economic trends in New York City.
Do you think any of these companies are in for trouble?
Interactive Chart: Use the Compar-O-Matic to compare market caps for the stocks mentioned below:
2. Estee Lauder Companies Inc. (EL, Earnings, Analysts, Financials): Engages in the manufacture, marketing, and sale of skin care, makeup, fragrance, and hair care products worldwide. Market cap of $22.70B.
3. Michael Kors Holdings Ltd. (KORS, Earnings, Analysts, Financials): Engages in the design, marketing, distribution, and retail of branded women’s apparel and accessories, and men’s apparel. Market cap of $8.26B.
4. Lululemon Athletica Inc. (LULU, Earnings, Analysts, Financials): Engages in the design, manufacture, and distribution of athletic apparel and accessories for women, men, and female youth primarily in Canada, the United States, and Australia. Market cap of $9.61B.
8. True Religion Apparel Inc. (TRLG, Earnings, Analysts, Financials): Designs, develops, manufactures, markets, distributes, and sells apparel in North America, Europe, Asia, Australia, Africa, and South America. Market cap of $672.17M.
(Written by Rebecca Lipman. Data sourced from Finviz.)
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Analyze These Ideas: Getting Started
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Dig Deeper: Access Company Snapshots, Charts, Filings
- Coach, Inc. (COH, Chart, Download SEC Filings)
- Estee Lauder Companies Inc. (EL, Chart, Download SEC Filings)
- Michael Kors Holdings Ltd. (KORS, Chart, Download SEC Filings)
- Lululemon Athletica Inc. (LULU, Chart, Download SEC Filings)
- Ralph Lauren Corporation (RL, Chart, Download SEC Filings)
- Saks Incorporated (SKS, Chart, Download SEC Filings)
- Tiffany & Co. (TIF, Chart, Download SEC Filings)
- True Religion Apparel Inc. (TRLG, Chart, Download SEC Filings)
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