Social issues are creating a market downdraft for America's mainstay brands — just ask Target, Anheuser Busch, Kohl's and their collective $28.7 billion loss in market value since the beginning of April.
Why it matters: Fiercely contested cultural issues have always aroused political passions, and held sway over electoral politics.
- Yet Corporate America is finding itself trapped between society's progressive impulses, and the conservative backlash.
- Reactions and counter-offensives against all things "woke" mean companies can find themselves in the crosshairs anytime, and they can't predict the fallout.
Driving the news: Anheuser-Busch InBev is still feeling the reverberations of its April decision to engage transgender social-media influencer Dylan Mulvaney. Boycotts have come at a cost to both its stock and beer sales.
- The controversy has shaved billions off its market capitalization amid a 20% swoon in its stock (it's since recovered, but sits well below the 52-week high it hit in March).
- This week, NielsenIQ data from consulting firm Bump Williams showed Bud Light losing its perch as America's most imbibed brew to Constellation Brands' Modelo.
Separately, both Kohl's and Target have been caught in the cultural maelstrom for selling LGBTQ-themed clothing, with right-leaning protests pressuring their stock prices.
- In spite of what analytics firm Placer.ai called a "significant boost" in first-quarter store visits that increased earnings, Kohl's shares are underperforming a market that's rallying broadly. The stock slumped by over 20% in the wake of the furor, but has since rebounded.
- Pushback against Pride Month merchandise, and a Bank of America downgrade, shaved $15 billion from Target's market cap. It’s since recovered, currently sitting around $63 billion, down from around $74 billion in May.
Zoom out: The suddenly soured market fortunes of the three brands are part of a phenomenon that's grown more acute as the electorate becomes increasingly polarized.
- Politics is having real economic and financial spillover effects, making it increasingly difficult for investors to price in those risks.
Reality check: Markets and consumers are fickle. The stocks and market value of all three companies have fluctuated — and somewhat rebounded — since facing an initial backlash.
What they're saying: "Many companies celebrate Pride by changing their logos, sponsoring celebrations, and offering themed products. While these corporate statements have been broadly accepted for years, the intensifying culture war may make companies more vulnerable to backlash," Eurasia Group analysts Kylie Milliken and Noah Daponte-Smith wrote in a client note last month.
- "While conservatives will attempt to inflict economic consequences on companies that are more vocally supportive of transgender rights, progressives will expect brands to be inclusive and will boycott companies that minimize their LGBTQ+ support in response to conservative pressure," they added.
The bottom line: The largely symbolic gestures companies show during Pride Month are morphing into business and financial risk, with reaction from the left and right leading to unpredictable companies. And no company is safe from the ricochet.
