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Abercrombie & Fitch Co. (ANF), Urban Outfitters, Inc. (URBN): Outrageous Pay Package Companies to Avoid

Speaking of competitor Urban Outfitters, Inc. (NASDAQ:URBN), its CEO and co-founder Richard Hayne also made that same list of most valuable CEOs, making $8.00 per million of market cap. I’ve liked Urban Outfitters, Inc. (NASDAQ:URBN) for some time and although the P/E is getting stretched at 25.58, analysts thinks it will generate over 15% EPS growth year over year.

Barclays just initiated coverage at Overweight on April 1. Seven analysts have strong buys, seven have buys and 16 have holds on Urban Outfitters, Inc. (NASDAQ:URBN). The name was also featured recently on Jim Cramer’s lifestyle brands index as being”cool.” The stock is up 42.8% over the last year.

While not in the top five Leslie Moonves, CEO of CBS Corporation (NYSE:CBS), also made the Bloomberg list with a $69.9 million pay package worth 1,111 employees’ salaries. Compare him to CEO Vincent Forlenza of Becton, Dickinson and Co. (NYSE:BDX), whose pay equals 185 employees and as the company commented, 75% of Forlenza’s pay was tied to performance. Or we can compare again to Warren Buffett, who is paid the equivalent of 10 employees’ salaries. That’s right, just 10.

Moonves has enjoyed some sweet perks in the past including a NYC apartment that Viacom paid him to sleep at to the tune of $100,000 plus in 2004. At that time his pay package was much lower at $20 million.

Moonves is not a founder like other top names — Ralph Lauren,  Howard Schultz, and Larry Ellison of Oracle Corporation (NASDAQ:ORCL), and that founder’s premium has to be considered. A founder/CEO not only has an emotional tie to the company but usually has a strong tie in the form of accumulated stock. At least Moonves holds stock in the company — 1,268,754 shares to be exact. Not tying a CEO to company stock gives no incentive to perform.

Moonves has helped CBS Corporation (NYSE:CBS) though, with the stock up 38% this year alone. It trades at a 19.18 P/E with a yield of 1.0% and a PEG of 1.07. This compares favorably with competitor The Walt Disney Company (NYSE:DIS) with its 20.22 P/E, yield of 1.2%, and PEG of 1.46.

With similar numbers, does Moonves deserve his premium pay compared to The Walt Disney Company (NYSE:DIS) CEO Bob Iger’s $31 million, making Iger’s compensation equal to 557 employees’ salaries? And whose company’s stock is up 46% over the same timeframe?

Moonves has done wonders at CBS (look at the chart) and so is not an empty suit, but he seems overpaid compared to Iger. I’d rather own Disney anyway for its parks, cruise line, branding business, films, TV, ESPN, ABC, cable content, and radio.

Let’s sew it up

Abercrombie & Fitch Co. (NYSE:ANF) is a name to avoid. Its competitors like Urban Outfitters, Inc. (NASDAQ:URBN) are outperforming them and the CEO is overpaid for what only be described as miserable stock performance (see chart below). CBS, while similarly valued to Disney, doesn’t have that all-important branding business and Moonves is probably overpaid as well.

Disney and Urban Outfitters, Inc. (NASDAQ:URBN) have both run big and if there is a selloff in May one could start accumulating them on pullbacks.




DIS Total Return Price data by YCharts

The article Outrageous Pay Package Companies to Avoid originally appeared on Fool.com and is written by AnnaLisa Kraft.

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