Companies, just like people, grow and change over time. Sometimes, as is also the case with people, that growth and change can be for the better. Other times, it can be for the worse.
Nonetheless, change in a company’s brand, image, or purpose often leads to big volatility in the stock price. But at the end of the day, positive change almost always accompanies a surge in stock price, while negative change almost always accompanies a drop in stock price.
As such, investors looking for winning investments would be wise to take a peek into the box of companies that have successfully rebranded themselves as winners. These companies have not only gone from loser to winner, but the management teams have also shown an adept ability to adapt. And when it comes to making your business grow in the long-run, the ability to adapt is everything.
With that in mind, here are three companies that have successfully rebranded as winners over the past several years.
Rebranded Winner 1: Facebook Inc (FB)
By now, it feels like the whole Cambridge Analytica scandal that plagued Facebook, Inc (NASDAQ:FB) in mid-March is already old news.
That is a testament to the strength of Facebook’s operating model. It’s also a testament to the adaptability of Facebook management to spin a headwind into a tailwind.
Facebook handled the whole issue really well. CEO Mark Zuckerberg actually got somewhat ahead of the issue by beating the drum of “community safety over profits” in the prior few conference calls. Then, when a whistleblower blew open the whole Cambridge Analytica scandal, Zuckerberg and Company issued an apology, and explained the details of the incident in a blog post.
Zuckerberg proceeded to appear in front of Congress, and was refreshingly honest and humble versus the Wall Street titans who have tended to occupy that same hot seat over the past several years. Now, Facebook is running an ad on national TV that reminds consumers of what makes Facebook good, openly talks about the stuff that has made Facebook bad recently, and promises to get back to the good stuff.
All these moves are working.
Facebook reported perhaps its best earnings report ever amid its worst PR incident ever. Revenue growth accelerated to 50%, a mark which bests the total revenue growth at even Amazon.com, Inc. (NASDAQ:AMZN) and Netflix, Inc. (NASDAQ:NFLX). Margins exploded higher. Earnings growth was an absurd 63%.
In other words, Facebook has successfully navigated through its worst PR incident ever, and is now back on track as a winning company with a winning stock.
Rebranded Winner 2: Abercrombie & Fitch Co. (ANF)
Pretty much every mall-based retailer has struggled over the past several years, but Abercrombie & Fitch Co. (NYSE:ANF) was one of the biggest losers earlier this decade because the company essentially shot itself in the foot with an excessive amount of hubris.
Back in 2011, when Abercrombie & Fitch was still the coolest brand around, the company offered a large sum of money to reality TV personality and Jersey Shore star Mike Sorrentino (otherwise known as “The Situation”) to not wear the brand’s clothes. While the motive behind that offer may have been good, it showed that Abercrombie & Fitch did somewhat put their brand on a pedestal.
Then, in 2013, the press got a hold of a 2006 interview in which Abercrombie & Fitch CEO said that his brand was exclusionary and intended only for the cool kids.
Not coincidentally, ANF sales dropped and the stock plummeted from $70 to $10.
But the company is finally starting to turn a corner.
The CEO behind the “cool kids” remarks was pushed out in 2014. The company did its best to re-brand itself as a clothing company that accommodates all types of people. It ditched the big ANF logo, which had fallen victim to waning popularity at the start of the decade. The company also refreshed a whole bunch of its stores and invested big into its digital platform.
The results have been largely positive.
ANF has rattled off a string a positive comparable sales growth quarters in a row, while margins and earnings are improving. Alongside these improved results, ANF stock has taken off from under $10 to over $25.
All together, Abercrombie & Fitch has successfully ditched the elitist attitude that dragged the company down in the early part of this decade. Now, brand popularity is rebounding, and the stock is soaring.
Rebranded Winner 3: Netflix, Inc. (NFLX)
The thing about Netflix is that the company is so hot right now that everyone seems to forget that it was essentially left for dead in 2011.
At that point in time, CEO Reed Hastings decided to split apart the DVD and streaming businesses — they were packaged together before. The net result was a massive price hike for anyone who wanted to keep both services. Because consumers and analysts lacked sufficient foresight to see that streaming was the future and DVD was a dead-end, Netflix lost a ton of subscribers and analysts downgraded the stock and cut estimates.
By the end of 2011, NFLX stock had fallen to below $10 (it was a $40-plus stock in July of that year).
Today, Netflix is a $330 stock.
What happened? Well, streaming took off. It is that simple. Netflix took a giant bet in 2011 that streaming was going to be the future, and changed its operating model accordingly. The near-term push-back was awful. But the long-term benefits have been really good.
Like 3,200% good.
The Netflix rebranding story is one that really illustrates just how profound change can be for a company. Had Netflix not taken a bet in 2011 and kept the DVD and streaming businesses bundled, it is highly unlikely that NFLX stock trades at $330 today. But Netflix did take that bet, and it did make that change. Consequently, NFLX stock is at $330 today and the company is marching towards world domination of the entertainment industry.
As of this writing, Luke Lango was long FB and AMZN.
