1. Martha Stewart
Leave aside Stewart’s five months in prison for lying about her sale of ImClone stock. Disregard her unbelievably high compensation as nonexecutive chairman of Martha Stewart Living Omnimedia Inc. (NYSE: MSO) — even as the company’s revenue has consistently dropped, and its shares have plummeted more than 60% during the past five years, while the S&P 500 has jumped 20%.
The domestic diva and her namesake company have landed on the front pages again, this time in a legal battle between Macy’s Inc. (NYSE: M) and J.C. Penney Co. Inc. (NYSE: JCP) about which retailer has the rights to sell Stewart-labeled products. Omnimedia cut a deal with J.C. Penney in late 2011, giving the retailer the right to sell Stewart-branded goods in its store. At the same time, J.C. Penney also bought 16.6% of Stewart’s company for $38.5 million. Macy’s promptly sued, claiming that its exclusive rights to the Stewart product line, set in 2006, had been violated. The latest public blunder has further damaged a brand that began a downward trend years ago.
Steve Jobs built Apple Inc. (NASDAQ: AAPL) into a seemingly unassailable juggernaut — and the world’s most valuable public company. The reputation was carefully crafted for more than a decade by Jobs, who created entirely new product categories, and then dominated them with devices such as the iPod, iPhone and iPad.
Apple’s single most public disaster was its decision to dump rival Google Inc.’s (NASDAQ: GOOG) Maps system and replace it with its own product. Following a huge wave of negative press, Apple CEO Tim Cook wrote a public letter apologizing for the mess and, at one point, even suggested users rely on Google Maps instead.
At the heart of Apple’s brand decline is the simple fact that it has lost reputation as the prime innovator in the industries it once led. A year ago, no one could have imagined that a product like the Samsung Galaxy SIII would compete with the iPhone 5, or that the Galaxy S4 would be viewed as better than the iPhone. Apple lost its position as one of the world’s top brands in a remarkably short time. It has not launched a revolutionary product in more than two years. For most companies, the launch of such a device once a decade would be sufficient. For Apple, it is nothing short of a failure.
The South Korean vehicle maker and its stablemate Kia have been among the fastest growing car and light truck brands in America over the past decade. Hyundai’s share of the U.S. market grew from about 2% in 2001 to more than 4% in 2011. During that period, Hyundai and Kia offered what Japanese companies had for decades — high-quality vehicles at affordable prices. They burnished their images with a 100,000-mile warranty package dubbed “Hyundai Assurance.” However, in November 2012, the EPA charged the companies with inflated MPG claims, and they lowered the stated MPG ratings on many of their vehicles.
USA Today described Hyundai’s reaction as “shocking.” It said, “Hyundai, in a burst of hubris, deals with the issue by portraying itself as a consumer champion on its home page — even though the reduction resulted from an Environmental Protection Agency investigation.” More recently, Hyundai and Kia said they would recall approximately 1.9 million cars in the United States to “fix a potentially faulty brake light switch,” Yahoo! News reported.
The huge aerospace company has turned years of delays in the launch of its 787 Dreamliner into a nightmare for carriers. And passengers have become concerned whether the plane will be safe once it returns to service.
Major production delays began in 2007. The first passengers did not step aboard a 787 until an October 26, 2011, flight from Tokyo to Hong Kong — three and a half years later than initially planned. However, the events after that flight make the delays seem insignificant by comparison. Incidents of burning lithium-ion batteries caused the entire 787 fleet to be grounded. Despite further battery tests by Boeing Co. (NYSE: BA) and regulators, the FAA has yet to allow the plane to go back into service. Ultimately, the 787 will be recertified, but the brand will be badly damaged for a very long time, at least in the eyes of the flying public. As the Los Angeles Times recently reported, “Boeing Co. is now battling on two fronts: fixing the source of the problem and regaining the trust of the flying public.”
5. J.C. Penney
The deterioration of one of America’s oldest retailers has been going on for some time. In the five years before Ron Johnson’s appointment in late 2011, the J.C. Penney share price dropped 60% under CEO Myron “Mike” Ullman. Johnson embarked on an expensive turnaround plan, which included a new logo, advertising and the end of deep discounts, coupons and sales events once popular with customers. None of this appears to have worked. Total sales fell 24.8% last year to $13 billion, while same-store sales fell 25.2%. Internet sales, absolutely critical to retailers as e-commerce emerges as a primary source of revenue, dropped 33% during the year. The day after Johnson’s dismissal, share prices hit a 12-year low.
Firing Johnson this week was the clearest repudiation of his turnaround strategy and the only sane decision by the board. According to recent reports, same-store sales dropped 10% in the quarter that just ended, likely contributing to his dismissal. Reinstating the former CEO responsible for the company’s previous woes defies explanation.
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