Do Consumer Boycotts Affect Stocks?

Maurice Schweitzer is a professor of operations, information and decisions at the University of Pennsylvania's Wharton School.

Some consumers are boycotting businesses with ties to the National Rifle Association. What impact do you expect it to have on those companies' earnings? The school tragedy in Florida galvanized and energized a very activated group of protestors, but history suggests their coordination and energy is unlikely to persist. That's especially true of the calls to boycott companies that are indirectly associated with gun regulation. Roku, for example, doesn't sell or make firearms but streams an NRA TV channel. Vista Outdoor is one of the more vulnerable targets, with 54% of its revenue coming from shooting sports. Nonetheless, I don't expect the company to experience any meaningful drop in sales or a fundamental threat to its business.

How does this boycott against businesses that support the NRA compare with other boycotts in the past? Boycotts are either one-sided or two-sided. The boycott against BP following its 2010 Deepwater Horizon oil spill was one-sided because no groups rushed to BP's defense. The NRA boycott is two-sided, with impassioned groups rallying on both sides of the debate. We saw a comparable scenario play out during the 2012 Chick-fil-A boycott, when protestors looked to punish the fast-food chain after its CEO spoke out against same-sex marriage. Their efforts were hampered by groups on the other side of the issue, who went out and bought chicken sandwiches. This year, we'll see the NRA's 5 million members similarly boost their support for targeted businesses.

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What should investors do if they own shares in one of these companies? Some of these companies' share prices might swing a bit, creating potential bargains, but they should stabilize once the movement starts losing steam. Investors should sit tight, hold on to their shares and ride this out.

How much influence can a typical shareholder expect to have with the company? A shareholder who wants to voice an opinion can send the company a letter, but his or her vote in shareholder elections will be diluted by the votes of institutional shareholders. To take a stand, individual investors can invest in mutual funds that avoid or invest in stocks related to issues they care about.