(By Rebecca Lipman)
Luxury stocks are taking a bigger hit in the wake of the economic crisis than originally anticipated. New York luxury storeowners and real estate agents are wondering whether they have to brace for some of Wall Street’s pain, reports Reuters.
The hit comes from several angles – consumers are facing unemployment, layoffs, salary cuts, reduced or no bonuses and concern for their future financial and employment status. Big banks are also reporting and anticipating lower earnings, causing them to set aside less money for overall compensation.
Many of the big banks that have announced their plans to lay off workers, including Bank of America, JPMorgan Chase, UBS and Goldman, have a large presence in New York City and employ much of the city’s elite.
“Given that the New York area accounts for nearly a third of the nation’s entire annual $65 billion luxury retail market, any blows here will have reverberations for the U.S. as a whole,” reports Reuters.
And even those who are still getting big bonuses may be hesitant to flaunt it given the current anti-Wall Street sentiment gripping the nation.
Real estate agents also have to worry about their luxury clients upgrading and buying apartments. The market for apartments worth $4 million or more has dropped while “more modestly priced apartments” in the range of $600,000 are still selling well, according to Donna Olshan, president of Olshan Realty in an interview.
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.
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.
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1. Saks Incorporated (SKS): Operates fashion retail stores in the United States. Market cap of $1.57B. Share price as of 10/20 at $9.91. According to Reuters, Saks’ Manhattan flagship store makes up more than 20 per cent of company sales. This is a risky stock that is significantly more volatile than the overall market (beta = 2.55). The stock is a short squeeze candidate, with a short float at 31.32% (equivalent to 9.41 days of average volume). The stock has lost 2.87% over the last year.
2. Tiffany & Co. (TIF): Engages in the design, manufacture, and retail of fine jewelry worldwide. Market cap of $9.06B. Share price as of 10/20 at $72.3. According to Reuters, Tiffany makes up 8 per cent of company sales from its store on Fifth Avenue. The stock has gained 45.08% over the last year.
3. Coach Inc. (COH): Engages in the design and marketing of accessories and gifts for men and women in the United States and internationally. Market cap of $17.18B. Share price as of 10/20 at $59.11. The stock has gained 35.84% over the last year.
4. Polo Ralph Lauren Corp. (RL): Engages in the design, marketing, and distribution of lifestyle products. Market cap of $13.29B. Share price as of 10/20 at $145.9
Interactive Chart: Press Play to see how analyst ratings have changed for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
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