Boycott or Not, Under Armour Stung By Trump's Toxic Touch

Noticing the rash of boycotts called into action over the past year, TriplePundit is taking a closer look at whether they actually work.

The recent case of the popular athletic brand Under Armour offers some interesting insights. The company has been in the media spotlight since last weekend, when CEO Kevin Plank praised President Donald Trump in a televised interview.

His endorsement sparked a boycott along with a storm of pushback from Under Armour's celebrity endorsers, including the popular actor Dwayne “The Rock” Johnson.

And revolt from spokespeople is a significant development. Conflicts between companies and celebrities on their payroll usually stem from misdeeds by the celebrity, not the company. In addition, the proactive stance Under Armour's endorsers took also muddies the waters when it comes to measuring the impact of a consumer boycott against other factors influencing corporate behavior.

Did the boycott work?

To be clear, without consumer research in hand it's difficult to tell whether the Trump connection turned a significant number of consumers away the Under Armour brand, if any at all.

For example, last November disappointing sales of Under Armour's much-publicized Stephen Curry shoe lead to a $600 million decline in the company's value. (Sales of the shoe started out strong, but did not perform as well as expected.) That was long before Plank issued his comments. Industry observers at the time posited that consumers turned away simply because the shoe had an unfashionable high-cut profile.

The company also took another hit in the stock market at the end of January, shortly after Trump issued the oft-called "Muslim ban."

The travel restrictions were issued just one week after Plank met with President-elect Trump on behalf of Under Armour, along with 11 other leading U.S. manufacturers. The meeting was part of Trump's much-publicized manufacturing initiative. However, it's highly unlikely that a large number of Under Armour customers were paying attention to the meeting.

News about Plank's comments didn't break until Feb. 8. During the course of an interview that touched on the manufacturing initiative, Plank made this observation:

“He’s highly passionate. To have such a pro-business president is something that’s a real asset to this country,” Plank said of Trump.

That remark set the Internet aflame and touched off calls for a boycott almost immediately.

Shortly after, the company's stock fell into junk status.

. . . That depends on who's doing the boycotting

It's still not clear that the boycott itself had a causal relationship to the company's latest misfortune.

However, you could make a strong case that the threat of a boycott was the straw that broke the camel's back when it comes to its valuation.

Keep in mind that research shows boycotts are rarely successful. But when they are, it's because the target is a company that is already vulnerable. And a declining reputation is one of those vulnerabilities.

The converse is reputational strength -- which is probably why, for example, Starbucks has sailed through at least seven boycotts that trended on Twitter over the past five years.

In the case of Under Armour, it's probably too early to measure the reputational impact of the Trump connection on consumers' brand choices. The main point is that consumer preference is now a moot point, because investors have already fled the company due to the mere threat of reputational decline.

New York Magazine offers a good explainer in that regard (do read the whole piece for more detail about the influence of "young urbanites"):

"While they have disproportionately weak influence over the policies of their government, they enjoy disproportionately strong influence over the messaging of their brands. This is because city-dwelling millennials are more likely to try new products than your average elderly person in rural America — and the former’s brand loyalty is more coveted, since they are less likely to die soon."

[snip]

"In the weeks since Trump’s inauguration, the president’s toxicity with urban millennials (a.k.a. cool America) has proven more salient to marketing departments than the threat of his Twitter tantrums."

[snip]

"This week, an analyst with Susquehanna International Group cut his target stock price for Under Armour from $24 down to $14, explaining that when Plank described Trump as a “great asset for America,” he made it “nearly impossible to effectively build a cool urban lifestyle brand in the foreseeable future.”

The analyst cited by New York Magazine was Susquehanna's Sam Poser. Market Watch offers this additional insight from Poser:

"He said the main reasons behind the downgrade are the 'reputational risk' created by the recent 'sloppy' political commentary made by Chief Executive Kevin Plank, 'too basic' apparel lines and the difficulties of building a lifestyle brand."

In terms of reputational decline, it's also worth noting that hunters have been boycotting Under Armour since last summer, complete with a Facebook page to that effect. That boycott began when Under Amour dropped its sponsored hunter over a controversial bear kill (the kill was actually made by her husband).

In addition, investors were already souring on the company, and not just because of the Stephen Curry shoe.

Some analysts attribute the company's overall poor performance last year to a general weakness in the consumer market that transcends politics.

Conventional retail stores in particular had a rough time in 2016:

"Many big retailers -- most notably Macy's (M) and Kohl's (KSS) -- reported weak results for the holidays, leading investors to wonder whether the American consumer is in trouble or if traditional retailers are just losing more ground to Amazon,' Paul R. La Monica wrote in CNN Money.

"Under Armour has been hit particularly hard by the problems facing brick-and-mortar retailers, especially those specializing in athletic wear. The Sports Authority went out of business. Finish Line (FINL) closed hundreds of stores last year."

By the end of January, investors finally decided that the company's "growth story" peaked out. Here's a representative comment:

“We suspect this reflects weakening demand in its domestic wholesale channel, slower demand for footwear and apparel and international challenges,” financial services firm Raymond James told Marketwatch.

When celebrity endorsers #resist

If you go by the New York Post (well, consider the source), Under Armour was flying high in the first half of 2016. In a glowing article last July, the Post attributed part of the company's success to its celebrity endorsers:

“It’s a well-curated group of aspirational athletes and models," retail strategist Melissa Gonzalez told The Post. "It sells the story of inspiration."

Other rivals pale in comparison. Reebok never reached this point because it couldn’t figure out how to connect with customers — and Adidas didn’t excel because it offered so many contrasting trends, brand-building expert Denise Lee Yohn noted.

"Under Armour has successfully built a strong brand by engaging certain market segments really well," Yohn told The Post.

As they say, the rest is history. If the average consumer was not paying attention to Plank's meetings and comments, celebrity social media probably caught their attention.

Several of the company's endorsers pushed back strongly in response to Plank's praise of Trump. Perhaps the most eloquent statement came from Dwayne "The Rock" Johnson, who posted on Instagram:

"I partner with brands I trust and with people who share my same values. That means a commitment to diversity, inclusion, community, open-mindedness and some serious hard work ... Great leaders inspire and galvanize the masses during turbulent times, they don't cause people to divide and disband. My responsibility here is not only to the global audience we serve, but also to the thousands of workers who pour blood, sweat, and tears into making Under Armour strong."

Do read the full piece to get the full impact. Johnson in effect declared that Plank's comments forced a choice:

"I feel an obligation to stand with this diverse team, the American and global workers, who are the beating heart and soul of Under Armour and the reason I chose to partner with them."

When news of Plank's comments broke, Under Armour responded swiftly:

"We have teammates from different religions, races, nationalities, genders and sexual orientations; different ages, life experiences and opinions. This is the core of our company. At Under Armour, our diversity is our strength, and we will continue to advocate for policies that Protect Our House, our business, our team, and our community."

Faced with a continuing firestorm of criticism, Plank himself walked back his support for Trump in a full-page ad in the Baltimore Sun.

Baltimore plays a significant role here because it is the company's home town, and in the letter Plank emphasized "hometown values" more consistent with those of a diverse city.

In the letter, Plank made it clear that Under Armour is actively opposed to Trump's travel ban on majority-Muslim countries and is taking positions on other items in the Trump legislative agenda.

Whether or not individual consumers made a difference by actively engaging in a boycott, the investor community decided the Trump connection damaged the Under Armour "cool factor."

It is virtually certain that other brands are watching this story closely.

If they're not, they should be.

Image credit: Flickr/jun560, creative commons license