Some brands saw their sale figures tank in 2015 and struggle to recover. Others benefited from a stronger economy aided by low interest rates and easier financing.
Check out 10 of the worst-performing companies this year based on recent sales figures. Also read about 10 companies, including some well-established powerhouses, that analysts consider poised to take off in the new year.
Keep Reading: 10 Stock Market Predictions for 2016
10 Brands That Took a Beating in 2015
The past year was a tough one for a number of big-name brands. Thanks to hackers, scandals, declining sales and even an E. coli outbreak, these 10 companies suffered financially in 2015. Read on to find out what happened.
1. Ashley Madison
Reports from the website A New Domain said that the value of the extramarital dating site Ashley Madison, which called itself a billion-dollar company, had been a total fabrication. But it was the scandal involving the hacking of its members that stole the show.
Marc Prosser, co-founder of Fit Small Business, said, “I don’t think any brand took a bigger hit this year than Ashley Madison. The very premise of the company was sleazy … a website built around enabling married men to have affairs. They banked on discretion as they promised their data would never be publicly used. So when hackers made all of that information public, it became a huge scandal that shook the very premise of Ashley Madison.”
BlackBerry, once ranked the fastest-growing company in the world with 43 percent of the U.S. smartphone market share in 2010, has been demoted. Due to the popularity of Apple’s iPhone and Google’s Android, BlackBerry’s market share has now been reduced to less than 2 percent. CEO John Chen predicted the company will recover and market share will be regained through its redesigned phones with new manufacturing and components.
Blackberry is aggressively rolling out new products globally and through acquisitions of companies such as AtHoc to achieve mass communication and collaboration. Market Realist reports that BlackBerry announced in June the availability of the new BlackBerry Leap smartphone in Italy, South Africa and Nigeria. The company also announced the square-screened BlackBerry Passport Silver Edition in Vietnam in August.
3. American Apparel
American Apparel, the made-in-the-USA clothing brand with 237 retail stores in 20 countries, has suffered declining sales and filed for Chapter 11 bankruptcy protection in October. The company calls its styles iconic, clean and timeless with a large variety of colors, but it’s not clear whether its model can survive. Another problem is its labor costs. American Apparel, which calls itself socially responsible, pays labor costs of $12 to $14 per hour in Los Angeles, compared with companies that pay $2 in Vietnam, about $2.75 in Thailand and over $3 in China, Fortune reported.
The company announced it will close stores in a $30 million cost-cutting and restructuring move that will take place over the next 18 months. It plans to invest in stores in more lucrative locations. Projections by the company show profits of $6 million by 2018 and $23.7 million by 2020. Consumers can look forward to revamped stores and new styles.
4. Men’s Wearhouse
Men’s Wearhouse is expected to issue dire third-quarter financial results in early December after its stock sunk in September. The Motley Fool reported that although sales at Men’s Wearhouse stores were solid, the brand that it purchased last year for almost $2 billion, Jos. A. Bank, wasn’t doing as well. Sales of that brand were down by 15 percent. Management fears that sales might fall as much as 25 percent in the fourth quarter.
The company has moved to cut back on the “buy one suit and get three free” discounts and promotions that characterize the Jos. A. Bank brand. But this has annoyed consumers, resulting in a drastic decline in traffic and affecting the brand’s established image. Investors will see a new strategy emerge as the company plans to broaden its appeal to younger customers with a wider range of products.
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The scandal involving Subway’s longtime spokesman, Jared Fogle, was a public relations catastrophe for this brand in 2015. But it turns out that the brand was already experiencing poor sales, said Mike Wood, an online marketer and owner of Legalmorning.com.
“The company had a 3 percent decline in sales the previous year as a result of competition from places like Chipotle,” which took a bite out of revenue for many businesses, he said. According to The Street, Subway rang up $11.9 billion in U.S. sales in 2014, which represented a 3 percent decline from the previous year.
Subway is addressing consumer dissatisfaction by saying that it will remove all artificial flavors, colors and preservatives from its U.S. menu by 2017.
The Volkswagen emissions scandal is expanding as federal and California environmental officials are now probing Volkswagen, Audi and Porsche models with 3.0-liter diesel engines as far back as the 2009 model year, Bloomberg reported. This comes after authorities initially focused on newer models.
The company had said it will set aside $7.1 billion to fix the smaller cars it admitted in September that were rigged to pass emissions tests. The stakes are higher in Europe as Volkswagen has more than double the market share of any competitor, Bloomberg reported.
Meanwhile, as automakers reported robust sales in September, Volkswagen reported a sales increase of 1 percent. Subaru reported a 28 percent gain; Ford reported a 23 percent increase; Toyota had a 16 percent increase; Fiat Chrysler reported a 14 percent gain and General Motors saw a 12 percent gain.
Some analysts predicted that Volkswagen would be able to withstand the crisis. The company intends to introduce 20 new hybrid or all-electric vehicles by the end of the decade.
Third-quarter sales were solid for Walmart, but this follows a long period of decline as the company reported lower profits in U.S. stores. The stock is down 33 percent this year, making it the worst performer in the Dow, CNN reported. Warren Buffett’s Berkshire Hathaway announced it cut its stake in the retailer. Walmart has warned that profits will continue to decline due to planned investment.
Neil Currie, managing director and consumer markets strategist for Mischler Financial, said it was too early to say whether Walmart will have a strong holiday season. “Apart from sheer scale, something Walmart has had for some time, it is becoming more difficult to see what the unique aspects of Walmart’s business model are. Is a one-stop shop in a giant store what customers want today?”
The retailer is overhauling its fresh food department and updating stores’ layout so shoppers can better navigate the store aisles.
Chipotle is struggling to recover from a recent E. coli outbreak but has reopened 43 Pacific Northwest restaurants. Third-quarter results for 2015 show that company sales rose 2.6 percent compared with a sales increase of 4.3 percent in the second quarter and a 10.4 percent increase in the first quarter. The Motley Fool cited a decline in efficiency and productivity for the falling sales figures.
In light of the E. coli outbreak, Chipotle is vowing to increase deep cleaning and sanitization in its restaurants, improve food handling procedures and test fresh produce, raw meat, cooking surfaces and equipment.
McDonald’s had a terrible year in 2014 with some of its worst declines, according to Entrepreneur magazine. In response to consumer preferences for healthier food, the company’s rebranding strategy includes the roll out of customizable burgers, an all-day breakfast menu, interactive kiosks and a sleek new look in some locations to appeal to its biggest consumer base — millennials.
Vijar Kohli, portfolio manager for Golden Door Asset Management, said McDonald’s tried to create a Starbucks-styled theme about 10 years ago when it first introduced the McCafe platform, hoping it would encourage consumers to stay longer than the usual visit and spend more money. But it was no match for Starbucks. The restaurant’s latest rebranding efforts, though, seem to be successful.
“The Golden Arches have pulled through as a marvelous restaurant stock, delivering 20 percent year-to-date returns for investors. For a company where analysts had second thoughts, McDonald’s has significantly outperformed the overall market with its new growth strategy,” Kohli said. “As McDonald’s perfects its new all-day breakfast menu and growth opportunities in Asia, the company is positioned to have growing revenue in the foreseeable future. With $4 billion in free cash flow, McDonald’s might be richly valued, but investors can sleep well knowing the company is well-equipped to fund its future growth.”
ESPN had a rough year culminating in some 300 employee layoffs. Parent company Disney reportedly ordered ESPN to trim $100 million from its 2016 budget and another $250 million in 2017, according to TheBigLead.com. The number of homes with ESPN surpassed 100 million in 2011, but that figure has declined steadily to 92.9 million. With dwindling cable subscribers, ESPN is looking at alternatives that could eventually include standalone ESPN subscriptions, according to Business Insider.
10 Brands Set to Take Off in 2016
Unlike the 10 companies you just read about, the following 10 brands had a solid 2015 and are expected to do even better in 2016. Click through to find out which 10 companies you should keep your eye on next year.
Robo advisory services will take off in 2016. These online services provide low-cost algorithm-based portfolio management advice tailored to clients’ needs and risk profiles. They include startup companies and fund giants. Betterment is one such company.
Andy Brantner, chief financial planner with StartInvestingOnline.com, said Betterment “hit $3 billion in assets under management this year, making it the largest automated investment service [and] making them a definite winner.”
According to Investment News, the company will offer 401k plans to employers in 2016 in a new platform called Betterment for Business. The automated investment platform will compete against Vanguard Group, Prudential, Fidelity Investments and other industry giants.
Zenefits is an online payroll platform that offers free software. The company receives revenue from companies that use the software to choose a payroll provider or other HR service. According to Ross Simmonds, strategist and entrepreneur, “Zenefits is a tech company that many investors are doubting, but I’m a firm believer that this company is going to further disrupt the HR industry in a serious way this coming year.”
He called the company’s recent announcement, which unveiled its own payroll platform, a huge move after a break in the relationship with ADP payroll services firm. “About one-quarter of ADP’s customers were from Zenefits, but ADP appears to have been nervous after hearing that Zenefits raised a $500 million funding round with a $4.5 billion valuation. I think this upcoming year is the beginning of something that they’ll be talking about in business schools years from now,” Simmonds said.
3. Lending Club
Priyanka Prakash, a finance writer at FitBizLoans, said two similar companies that took a beating in 2015 are poised for success in 2016. One is Lending Club. “Right after its initial public offering, Lending Club’s share price was at a high of almost $30 per share, and now it sits around $13 per share,” she said.
Yet Prakash sees great potential for 2016. “Lending Club originated $2.2 billion in loans in the third quarter of 2015, which is a 92 percent jump from the previous year. Lending Club claims to be the world’s largest online marketplace. It connects borrowers and investors and provides cheaper loans than traditional banks and attractive risk returns for investors,” she said.
Seeking Alpha, a website that provides financial analysis, likened Lending Club to Netflix, Chipotle and other companies that experienced rapid early growth.
4. OnDeck Capital
OnDeck Capital is the other pick by Prakash. “Lending Club and OnDeck have received a lot of buzz for challenging the banks and providing loans to a wider set of borrowers. Each took a drubbing on the stock market this year. OnDeck’s initial public offering share price was $20 per share, and it’s now around $11 per share.
“When a company goes public, its stock value isn’t always a reflection of revenue growth or even whether it’s turning a profit. Instead, that value is substantially based on what people expect of the company. People had such high expectations for these companies. The stock price dropped when they didn’t quite live up to those expectations,” Prakash said.
OnDeck loan originations grew 54 percent during the third quarter of 2015, and it has expanded its loan offerings, she said.
5. Home Depot
Home Depot posted third-quarter profits that exceeded analysts’ estimates. Sales increased by 6.4 percent to $21.8 billion, and the gains have been steadily increasing. Profits were greater than analyst predictions of $1.32 a share and reached $1.36 a share, according to Bloomberg Business.
The company’s strategy of concentrating on integrating e-commerce and logistics rather than opening additional stores is paying off. Same-store sales also improved to a greater extent than analysts expected by 5.1 percent as opposed to 4.6 percent.
Home Depot will continue to benefit from lower gas prices, better housing prices and consumers who want to improve their homes. Home Depot forecasts healthy profits of $5.36 per share for the coming year, Bloomberg reported.
6. Virgin America
Virgin America reported record third-quarter earnings for 2015. Aided by low fuel costs, the company experienced its highest ever net income and operating margins. Net income increased 73 percent year-over-year. Earnings per share were $1.61.
Fuel costs dropped by about 35 percent; however, the company saw hikes in landing fees and aircraft maintenance.
The airline plans to maintain a low-cost model and is reinvesting profits to improve the consumer’s experience. Total operating revenue was $410.9 million, an increase of 1.3 percent over the third quarter for 2014.
Alibaba is China’s biggest tech company and has been described as a combination of Amazon, eBay and PayPal. Alibaba called its initial public offering in 2014 the largest in the world. The company outdoes Citigroup or Facebook in terms of capitalization.
Kevin Carter is the founder of the Emerging Markets Internet & Ecommerce ETF. Alibaba is one of its top holdings. “Alibaba’s business momentum is still strong,” he said. He cited its 30 percent growth in the first three quarters of this year and a “blowout” in its annual shopping event dubbed Singles’ Day, which reportedly pulled in more than $14 billion in sales.
“While the stock is off year bottoms, a lot of people wrote off Alibaba after its 50 percent drop,” he said. “The price/earnings to growth ratio is reasonable for a company with great growth, great margins and profitability.”
8. Northrop Grumman
U.S. defense contractors are likely to profit from the fight against terrorism and a possible escalation of military activity. According to The Street, defense-related stocks rallied after the Paris attacks in November and Northrop Grumman stock gained over 4 percent.
Northrop Grumman has a partnership with Saudi Arabia going back more than 30 years. Defense contractors experience gains from international sales even when U.S. sales are stagnate.
Some 80 countries use Raytheon products, according to the company, with the strongest demand coming from the Middle East.
Jim Cramer, CNBC host of Mad Money, said defense stocks will rise as countries, and France in particular, build up their military in the aftermath of the Paris attacks. He said the market abroad for defense contractors will only expand. Like Northrop Grumman, Raytheon stock also gained over 4 percent on the Monday following the Paris tragedy.
10. Orbital ATK
Orbital ATK is a leading defense and aerospace firm that is partnering with Al Tuft International based in the United Arab Emirates of Abu Dhabi. The company provides operational services to governments and international organizations in the UAE and ammunition and aircraft to the military.
Orbital ATK recently partnered with Space Systems/Loral and U.S. Air Force Nuclear Weapons Center Intercontinental Ballistic Missile Systems Directorate in a five-year contract to produce equipment for commercial satellites.
According to The Street, Orbital ATK gained more than 6 percent on the Monday following the Paris tragedy. Revenues were partly from international sales (about 22 percent). The company also announced a joint venture in Saudi Arabia that’s designed to help that country bolster its security and self-defense, which also boosted the stock price.