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.
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.
Shortly after, the company's stock fell into junk status.
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."
"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.”
"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 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 () and Kohl's ( ) -- 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 () closed hundreds of stores last year."
“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.
“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.
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."
"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."
"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."
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.
Tina writes frequently for TriplePundit and other websites, with a focus on military, government and corporate sustainability, clean tech research and emerging energy technologies. She is a former Deputy Director of Public Affairs of the New York City Department of Environmental Protection, and author of books and articles on recycling and other conservation themes. She is currently Deputy Director of Public Information for the County of Union, New Jersey. Views expressed here are her own and do not necessarily reflect agency policy.