ESG Issues: Governance & Social
Management decisions at this fashion retailer led to loss of market share, revenue, and margin, putting the brand on a downward spiral. Our analyst also noted that the CEO and board member, who is also the co-founder, had publicly expressed views on social topics that resulted in loss of customers and market share. The company, which sells its products to mostly young female consumers, had a primarily male board with an average age over 70 yrs. Of the 3 female board members, one is a family member to the co-founder. In addition, the company relies on outdated marketing strategies that do not account for recent trends in customers’ lifestyles. Despite having the #1 market share in its category, and adequate free cash, the company’s idiosyncratic risks due to a poor management structure and questionable decisions led the LS analyst to flag her concerns and downgrade her forward-looking rating.