Being loyal to a brand these days means that the brand and part (or all) of it’s values align with yours, in one way making it part of a consumer’s identity. That being said, consumers are getting intensely picky with company practices and values, and hold business stakeholders liable for upholding these brand promises along with growing the business’ bottom line. Some companies are suffering because different groups of consumers demand different things, will it be possible to please them all? We’ve put together 4 companies that have seen corporate scandals and consumer protests affect their brand (and stock) value due to their corporate practices failing to align with consumers values and beliefs.
INVESTMENT FOCUS-History suggests Volkswagen shares may struggle to bounce higher: (Released: 27/05/16) It’s been eight months since Volkswagen’s scandal for cheating on diesel emissions tests, but people are not as forgiving as time is. Using past corporate scandals as comparison, Alistair Smout
(@asmo17) argues that even though Volkswagen shares are at their 2016 high right now, it will take considerably more time for a full recovery. The shares are up more than 50% from lows hit in October, yet a Reuters poll expects operating profit to be down 17% in the earnings to be released tomorrow.
Speaking of damaged reputations…
Bayer CEO Invites Environmental Groups to Talk About Monsanto Bid: (Released: 29/05/16) Bayer AG (BAYN) CEO, Werner Baumann called on environmental groups in an attempt to appease them over talks about the company’s intentions of acquiring Monsanto, and everything it stands for. He acknowledges the reputation Monsanto has but suggests that Monsanto could dissolve as a brand with this merger and that “The Bayer brand has an excellent world-wide reputation and appeal. This needs to be used.” The $62 billion deal would create the world’s largest agrochemicals company, raising concern from non-governmental organizations that the dominant market position that the company will hold if this merger goes through, would lead to higher prices and limited consumer choice. Monsanto’s Stock (MON) went up 11.7% when the news was disclosed, while Bayer’s shares closed more than 8% lower that day. Target Sales Drop Amid Transgender Promotion, Consumer Boycott, $10 Billion Stock Crash: (Released: 19/05/16) Warner Todd Huston (@warnerthuston) informs us that “Target’s stock has fallen 20 percent — from $84 per share to $67 per share — since it imposed the pro-transgender policy on its customer base of families.” Transgender rights is a much more sensitive subject than are environmental issues like the situations aforementioned because it has emerged fairly recently, with several corporations adopting inclusive policies aligned with their brand values, yet seemingly beyond what their consumer base is prepared for.
The Lemon that is Lululemon: (Released: 06/22/14) Back in 2013 Lululemon’s CEO at that time, Chip Wilson, blurted out a few comments implying that their yoga pants were not meant for certain types of bodies. This resulted in an immense scandal on the side of consumers that also raised criticism on the company’s hiring practices and their (lack of) women’s plus sizes. As for the stock, it dropped about 5%. When discussing the current status of the stock, Dan Caplinger (@DanCaplinger) says, “Lululemon’s future guidance still has some potential speed bumps, but the retailer’s efforts to win back customers it lost in its 2013 yoga-pant debacle appear to be working.” As a matter of fact, Lululemon Athletica was up by 11% after having better than expected results in their last quarter. They had a sales increase of 17%, and EPS was a nickel higher than forecasted, at $0.85. Next Wednesday, when their next earnings release is out, its for ourselves to whether they have completely recovered from their incident in 2013.