Back to Document List | ||
Copyright 2014 Gannett Company, Inc. All Rights Reserved USA TODAY |
May 8, 2014 Thursday
FINAL EDITION |
MONEY; Pg. 1B
|
549 words
|
Profiting from the unkindest cut of all; 14 firms that cut jobs yearly for 5 years see stock rise |
Matt Krantz, @mattkrantz, USA TODAY
|
Companies looking to boost stock performance through cost-cutting have found success in one specific category: workers.There
are 14 companies in the Standard & Poor's 500, including office
equipment maker Pitney Bowes, defense contractor Lockheed Martin and
grocer Safeway, that have methodically cut jobs every year the past five
fiscal years. These stocks are outperforming the market both in the
short term and long term.The Wall Street mantra typically is
about growing and investing, yet companies now are rewarded for doing
the opposite when it comes to their workforces. "This is what
shareholders expect management to do," says Jack Ablin of BMO Private
Bank. "Do more with fewer people." Some job cuts may not
necessarily be firing workers, but rather restructuring and
divestitures. But a more powerful force yet is the productivity gain
caused by companies replacing people with technology, Ablin says.The
biggest stock gainer from reducing jobs this year is Pitney Bowes. It
slashed its workforce almost in half, to 16,100, in the most recent
annual report, from 35,140 five years ago. Most of the big cuts came in
2013, when the workforce was cut by 41%. But in the past 12 months,
shares of the company are up 73%.Defense contractors Lockheed
Martin and Northrop Grumman have also been persistent job cutters.
Lockheed Martin, for instance, has taken its workforce down 21% in the
past five years, including a 4.2% cut in the latest fiscal year. But
investors have pushed shares up 60% in the past 12 months.It's
not just a theory. Shares of struggling office supplier Office Depot
soared 16% Tuesday after announcing plans to shutter 400 stores, having
an untold negative effect on jobs.Shares of these chronic job
cutters, on average, are up 18.8% in the past 12 months. That tops the
15.5% gain by the Standard & Poor's 500 during the same period. The
past five years, job cutters are beating the market by a wider margin,
gaining an average 269%, while the S&P 500 is up 103%.Cutting
jobs is a good way to boost stock price. But it looks like it's also a
way to help boost CEO pay. All five CEOs at companies that cut
workforces the most the past five years, who reduced the headcount each
of the past five years, got big raises in their most recent fiscal
years, a USA TODAY analysis shows.The biggest raise went to
Sandeep Mathrani, CEO of General Growth Properties, a real estate
investment trust. The company paid Mathrani $22.1 million in fiscal
2013, up 424% from the previous year, says the company's proxy filing.
That's despite cutting the workforce by more than half from levels five
years ago.Arthur Coppola, CEO of REIT Macerich saw his pay rise 57% in the most recent fiscal year to $13.1 million.This
reflects the trend in the broader economy, Ablin says. Profit has
outpaced sales for years, largely due to cost cutting. Many companies
that were once labor intensive are now technology intensive. Many of the
tasks done by armies of workers can be handled by computers, and larger
companies continue to see job growth stall to drive profits.It's
a reminder of how it's not existing companies that are the engines of
job growth, Ablin says, but new ones. Large companies "continue to
shrink their workforces," he says. "Perhaps we just need more
companies."
|
May 8, 2014
|
Terms and Conditions Privacy Policy
No comments:
Post a Comment