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Friday, May 10, 2019

Strategic CSR - Dick's + Guns

The article in the url below puts a price on principle. In particular, it reports the estimated cost to Dick's Sporting Goods of its decision last year to stop selling guns in the aftermath of yet another school mass shooting here in the U.S. (this time, in Parkland, FL):
 
"Last February, when Dick's Sporting Goods boss Ed Stack announced he was restricting gun sales at the country's largest sports retailer, he knew it'd be costly. At the time, Dick's was a major seller of firearms. Guns also drove the sale of soft goods—boots, hats, jackets. What's more, Stack, the retailer's chief executive officer, suspected the position could drive off some of his customers on political principle. He was right. Dick's estimates the policy change cost the company about $150 million in lost sales, an amount equivalent to 1.7 percent of annual revenue. Stack says it was worth it."
 
It is worth noting that this figure is not a total cost, but one for last year only. In other words, if the company continues not to sell guns, there will be a cumulative effect. Nevertheless, rather than regret his decision, Stack has doubled-down:
 
"'The system does not work,' Stack said. 'It's important that when you know there's something that's not working, and it's to the detriment of the public, you have to stand up.'"
 
It turned out that there was a direct connection between Dick's and this particular shooting:
 
"The 2018 school massacre at Parkland, Florida, touched a nerve for the company. Nikolas Cruz, the shooter, had legally purchased a shotgun from Dick's a few months before the attack. A day after Cruz was arrested, police in Vermont apprehended a teenager with plans to shoot up his high school. He, too, had legally purchased a shotgun from Dick's."
 
This is a significant cost that Dick's is enduring. In order to justify it, it would be helpful if the firm's stakeholders demonstrated their support (if they truly support the policy). Here, there is some good news and some bad news. In terms of shareholders, there still appears to be broad support for the company;
 
"The stock price hasn't suffered. Dick's shares, which didn't move much following the announcement last February, have climbed 14 percent in the 13 months since, outpacing the 4 percent rise in the benchmark Russell 3000 Index."
 
Consumers, it seems, are less committed:
 
"Some people applauded the CEO's decision and promised to show their appreciation with their business—a phenomenon called 'buycotting'—but those people didn't stick around."
 
Unfortunately, recent research shows that Dick's (or any other company that stands on principle) may see similar reactions, at least among consumers:
 
"What happened at Dick's confirms new study results out of Stanford University. Respondents said they were more likely to buy a product to support a CEO's political stance than they were to boycott in disagreement, but their actions revealed the opposite. When asked for specific examples, 69 percent could name a product they'd stopped buying, and only 21 percent could recall a product they started buying."
 
Or, as Stack puts it:
 
"Love is fleeting. Hate is forever."
 
Take care
David
 
 
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Restricting Gun Sales Cost Dick's $150 Million Last Year
By Eben Novy-Williams
March 29, 2019
Bloomberg Businessweek