Everyone’s former favorite Meemaw, Paula Deen, is seeing her cooking empire crumble as six of the companies she either endorses or is involved with have dropped her: Wal-Mart Stores, Inc. (NYSE:WMT), Smithfield Foods, Inc. (NYSE:SFD), Caesars Entertainment Corp (NASDAQ:CZR) Novo Nordisk A/S (ADR) (NYSE:NVO), The Home Depot, Inc. (NYSE:HD), and Food Network, owned by Scripps Networks Interactive, Inc. (NYSE:SNI). Her admission that she used a racial epithet decades ago in a deposition has created another flashpoint in the country’s racial debate.
Still deciding whether to keep her as an endorser are Target Corporation (NYSE:TGT), Sears Holdings Corp (NASDAQ:SHLD), and QVC, a home shopping channel owned by Liberty Interactive (Interactive group) (NASDAQ:LINTA), although by the time you read this, they will likely have dropped Deen as well.
Slogging through her deposition my takeaway was she was a loyal big sister to her brother who co-owns the Uncle Bubba’s restaurant at which alleged sexual harassment and racial abuse took place and that she knew little or nothing of any problems there. Whether the deposing attorney’s question, had she ever used a particular racial slur, was really germane to the case is just a lingering question.
Fallout from the furor
The damage is done and at Caesars Entertainment Corp (NASDAQ:CZR)’s, the people who work at the four Paula Deen-themed restaurants that will be shuttered are unemployed, those who worked on her two Food Network shows are jobless, and a proposed buyout of Smithfield Foods, Inc. (NYSE:SFD) by a Chinese buyer has yet more issues.
Paula Deen fans are all over the Food Network Facebook page protesting and her replacements are feeling some of their outrage. Deen fans have threatened a boycott of Smithfield Foods, Inc. (NYSE:SFD) who carry Deen endorsed hams. This is coming at a time of delicate negotiations between Smithfield Foods, Inc. (NYSE:SFD) and a Chinese buyer already complicated by Congressional concern over Chinese restrictions on US meat imports.
So far, Wal-Mart Stores, Inc. (NYSE:WMT), the world’s largest retailer, has not seen any significant reaction. Target Corporation (NYSE:TGT) and Sears Holdings Corp (NASDAQ:SHLD) probably won’t see a hit either whether they keep her or not, but these smaller names, Caesar’s with a market cap of $1.55 billion and Smithfield Foods, Inc. (NYSE:SFD), market cap $4.55 billion, have already been affected.
The fan reaction is not surprising as many admired the 66 year-old grandmother who overcame years of crippling agoraphobia and panic attacks. She started a small sandwich business to support herself, her two sons, and little brother Earl “Bubba” Hiers and grew it into an empire. Despite repeated tearful apologies most of Deen’s endorsements are gone forever although Novo Nordisk A/S (ADR) (NYSE:NVO) has left a tiny window open if Deen can gain the trust of her audience back.
When NIKE, Inc. (NYSE:NKE) dropped Tiger Woods and Lance Armstrong neither celebrity showed much remorse, especially not Armstrong. In these cases the companies should have known better as rumors of problems had been lingering for years.
What’s a company to do when the celebrity was a beloved figure and helped the bottom line? In time the furor will die down and once one company dropped her the others had little choice but to bite the deep-fried bullet. Smithfield Foods, Inc. (NYSE:SFD)’s stock had already had a huge runup after news of the Chinese buyout broke. Those who were still in the meat and pork producer name after that, hoping for something more, were just greedy hogs (pun intended).
Caesars Entertainment Corp (NASDAQ:CZR), though, is a troubled company. It has negative EPS of $11.45 and the stock closed on June 26 at $12.79. Why a company that owns 52 casinos in 7 countries can’t make money is a question shareholders might want answered. For the record, Paula Deen earned $17 million in 2012 and she didn’t have the house advantage.