Investing in “Woke” Risks: What Cracker Barrel Teaches Wall Street
When it comes to investing, perhaps it’s time to consider a company’s “hobbies” as part of the risk assessment. It can be tempting to overlook how a company engages with social issues, but recent events show that these factors can be just as crucial as interest rates or inflation trends. Take Bud Light’s Dylan Mulvaney campaign or Target CEO Brian Cornell’s departure for example; both were tied to their brands’ social stances.
This whole idea of “wokeness” relates to a broader cultural lens where race, gender, and social issues intertwine with business. Yet, it’s not exactly a mainstream ideology and doesn’t appeal to everyone.
Still, many businesses seem to be stepping into this territory, often with a disconnection from the prevailing public mood, which is increasingly skeptical of progressive narratives—even in casual settings like having a drink. This misalignment suggests that corporate leaders sometimes lose touch with their audience, and their advisors may not help matters.
Shareholders should, I think, demand more transparency from executives during earnings calls and annual meetings—less corporate jargon, more authenticity.
Sloan, the founder of S3 Partners and host of the “Risk and Return” podcast, has been examining the stock of Cracker Barrel, a somewhat dormant restaurant chain that’s been serving hearty meals for decades. The familiar yellow sign with Uncle Herschel is a staple of its branding.
With a market cap of around $1.2 billion, Cracker Barrel isn’t facing a crisis, but it does have some challenges—like any mature business. Sloan noticed that investor sentiment around the stock is cautiously split, with both long and short positions creating a battleground scenario. This suggests that any news could swing the stock dramatically.
Recently, there was a significant shift in their branding, which many interpreted as having a “woke” tone. The redesign eliminated Uncle Herschel’s image, inviting a public outcry that cost nearly $100 million in market value in a single day.
The Waiting Game on Rebranding
Sloan believes that gauging public sentiment during a rebranding phase is crucial, but waiting for clear direction can be tricky—especially with customers pushing back against “wokeness.” It seems like an uphill battle for marketing departments trying to appeal to demographics that may not even be interested.
On another note, it’s interesting to consider how different brands handle this dynamic. Take American Eagle, which has successfully avoided the pitfalls of unwanted rebranding. Their strategy, illustrated by ads featuring Sydney Sweeney, seems to resonate better without alienating any specific audiences. Their stock has reportedly risen about 20% since these campaigns launched—an impressive feat.
My takeaway for investors? Keep a reminder on your desk: “Go woke, go broke.” It’s worth urging company leaders to be mindful of these risks moving forward.
