Special Report

The 10 Most Hated Companies in America

A company can become broadly hated if it alienates a large enough group of people. It may frustrate customers with poor service, anger employees with unpleasant working conditions or low pay, and fail shareholders with poor returns. Often, these shortcomings are intertwined and it’s usually enough for a company to antagonize one of these groups for its reputation — and even its operations and finances — to suffer.

Many of the most-hated companies have millions of customers and hundreds of thousands of workers. With this kind of reach, it’s important to keep employees happy in order to maintain decent customer service. Often, poor job satisfaction leads to poor service and low customer satisfaction. McDonald’s and Walmart have risked this most recently as employees and some customers have protested the low wages at these companies — low enough to put workers below the poverty line.

Mass layoffs also contribute to low worker morale. Some of the most-hated companies have significantly reduced their workforces. BlackBerry, for one, has cut a third of its headcount as competitors Apple and Samsung have taken most of its market share. Wall Street has accused BlackBerry’s (NASDAQ: BBRY) management of missing the rapid adoption of consumer-friendly smartphones.

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Several organizations have managed to avoid this list by reclaiming some of their reputation in recent months. In 2012, the Facebook (NASDAQ: FB) IPO imploded and the company continued to face backlash because of its shifting privacy policies. In 2013, however, the social network’s share price soared and attention to its privacy issues dropped considerably.

T-Mobile (NASDAQ: TMUS) had a difficult 2012, losing scores of subscribers and receiving poor marks for customer service. But it had a much better 2013. In May, the company added 9 million new customers when it acquired Metro PCS. It has continued to add customers due to a new strategy that splits phone payments from service fees.

Many of the most-hated companies botched a product or a service. BlackBerry’s most recent line of smartphones, the Q10 and Z10, launched in a desperate attempt to take back some of the smartphone market, failed to catch on. Another major flop was the new store layout and pricing at JC Penney (NYSE: JCP), which alienated consumers and, eventually, investors.

Nothing harms the long-term reputation of a company, at least in the eyes of investors, more than a steep drop in its share price. The stocks of several of the most-hated companies posted double-digit percentage declines in the past year. This certainly happened to J.C. Penney, which has been swamped by competition from other large retailers, ranging from Macy’s (NYSE: M) to Target (NYSE: TGT). Similarly, lululemon’s (NASDAQ: LULU) stock was hammered following the see-through yoga pants scandal that put the brakes on the company’s rapid revenue growth and resulted in the resignation of its chairman.

It is worth noting that some of the companies on the list may have performed very poorly by some measures but well by others. A few of the most-hated companies have had good stock performance. Others have relatively satisfied customers. All of this was taken into account in compiling the final list.

To identify the most hated companies in America, 24/7 Wall St. reviewed a variety of metrics for customer satisfaction, stock performance, and employee satisfaction. This included total return to shareholders compared to the broader market and other companies in the same sector in the past 52 weeks. We considered customer data from a number of sources, including the Consumer Reports Naughty & Nice list, the ForeSee Experience Index, and the American Customer Satisfaction Index. We also included employee satisfaction based on worker opinion scores recorded by Glassdoor. Finally, we considered management decisions made in the past year that hurt a company’s image and brand value, as measured by marketing research firms BrandZ and Interbrand.

These are the 10 most-hated companies in America.

1. McDonald’s

McDonald’s (NYSE: MCD) was at the center of the most significant labor movement of 2013. The company has, between its owned and operated stores and franchises, hundreds of thousands of employees who earn barely more than the minimum wage. A recent study conducted by the National Employment Law Project (NELP) found that McDonald’s employees rely more on public assistance programs than any other large fast-food company, with an estimated $1.2 billion in costs to the public.

Making matters worse, McDonald’s advised some of its employees to sell their possessions to make-up for holiday spending debt. Recently, the fast food chain’s hotline designated to help its workers live on their modest incomes encouraged employees to apply for food stamps. Low wages may be why the fast-food giant scored just 73 in the American Customer Satisfaction Index, the lowest in the limited service restaurant.

McDonald’s poor revenue growth this past year can be explained in part by unfavorable economic conditions. Global same-store sales rose by only 0.9% in the third quarter. McDonald’s pays a substantial dividend and has share buyback programs, but its stock rose only 5% in the past year compared to 25% for the S&P 500.

2. Abercrombie & Fitch

Long-time Abercrombie & Fitch (NYSE: ANF) CEO Michael Jeffries is often referred to as the “modern founder” of the decades-old clothing line. But he became the subject of controversy when comments he made in 2006 about who the company wishes to see as its core customers recently surfaced. The comments implied that the teen retailer is looking to attract what he refers to as the “cool kids” and aims to avoid overweight customers. Still, he has the backing of the board. In response to an attempt by activist shareholder group Engaged Capital to force him out, the board gave Jefferies a new contract.

But the investment firm may have good grounds for dissatisfaction. Jeffries has made $79 million over the last three years. Meanwhile, the company’s stock has underperformed the S&P 500 in the last five and is down 30% in the past year. Investors have punished the stock as revenue and earnings have declined. In its last reported quarter, Abercrombie announced that revenue dropped to $1.03 billion from $1.17 billion the year before. The company had a net loss of $15.6 million compared to a profit of $84 million in the same period the year before.

ALSO READ: The Worst Product Flops of 2013

3. Electronic Arts

Leading game maker EA (NASDAQ: EA) has recently hit some serious roadblocks. The company’s highly anticipated SimCity reboot was by all accounts a public relations disaster. The game servers failed to function for nearly a week after the launch, which meant consumers couldn’t play the game for a week after they purchased it. The company eventually offered a free game to anyone who had purchased SimCity in the early days.

One of the free games offered was Mass Effect 3, another release that tarnished the company’s brand. Critics and gamers widely criticized the ending of the third installment of this very successful game as unsatisfying. The backlash was so severe that the company eventually released a free alternate ending. And there may be more troubles ahead. EA is having problems with yet another bug-filled launch, the fourth installment of the Battlefield franchise.

On top of this, investors are suing the company for allegedly making misleading statements about the game’s launch and overstating its success. It’s perhaps not surprising then that, once again, The Consumerist labeled EA the “Worst Company in America” last year — the first company ever to earn the dubious distinction two years in a row.

In March, EA CEO John Riccitiello resigned. While company shares have performed relatively well, there is recent cause for concern. Last quarter, the company reported a loss of $273 million.

4. Sears Holdings

Sears Holdings (NASDAQ: SHLD) is the parent corporation of retailers Sears and Kmart — both notorious underperformers. Investors have lost trust in controlling shareholder and chairman Eddie Lampert, whose poor management and decision-making has caused the company to shrink. Only 17% of the company’s workers approved of Lampert’s performance, according to Glassdoor.

Sears was also ranked among the worst companies to work for last year, according to an analysis of Glassdoor data by 24/7 Wall St. Employees rated it a 2.5 out of 5, among the lowest marks awarded to a company of that size. This may be why the ACSI gave Sears a lower customer service score than every retailer in the industry, except for Walmart.

In the third quarter of 2013, Sears Holdings posted a net loss of $534 million compared to a loss of $498 million in the same period the year earlier. More recently, comparable store sales fell by 7.4%, the result of a 5.7% decline at Kmart and a 9.2% decrease at U.S. Sears stores.

As is the case at many of the country’s largest retailers, Sears and Kmart are among the largest employers of low-wage workers in the country, according to analysis by 24/7 Wall St. in collaboration with NELP.

5. DISH Network

Subscribers aren’t impressed with DISH’s (NASDAQ: DISH) customer service. DISH earned a spot in MSN’s 2013 Customer Service Hall of Shame largely because of its aggressive sales tactics. Customers also complained about confusing contracts and unreasonable cancellation fees.

DISH is not the only company in the industry that customers despise, however, it reaps additional notoriety because of its relationship with its employees. Based on a 24/7 Wall St. analysis of Glassdoor data, DISH was rated as the worst company to work for last year.

Chairman Charles Ergen holds a controlling interest in the company. GMI Ratings, which rates corporate governance on publicly traded companies, warned that his personal investments might present a conflict of interest with DISH shareholders. A GMI Ratings analyst cautioned that “These are things to be concerned about because they raise reasonable questions about conflicts of interest and the overall integrity of governance at the company.”

Shareholders, on the other hand, have reason to be happy: DISH’s stock is up more than 50% in the last year, and more than 325% in the past five years.

6. Wal-mart

Like McDonald’s, Walmart (NYSE: WMT) bore the brunt of the labor protests around raising the minimum wage last year. The company employs more workers who make less than $10 per hour than any company in America, according to an analysis by 24/7 Wall St in collaboration with NELP. While the company reports that its U.S. workers make an average of $12.81 an hour, this does not include part-time hourly wages. According to Glassdoor, Walmart sales associates, who are often part-time hourly employees, earn less than $9.00 an hour, on average. Further, only half of the store’s employees approve of the CEO.

Customers were less satisfied with service at Walmart in 2012 than at any competing chain. Possibly as part of an effort to stem employee dissatisfaction and deflect negative media attention, the world’s largest retailer promoted 35,000 part-time workers to full-time status.

Comparable sales at Walmart’s U.S. stores declined 0.3% in the third quarter. Also, company shares have underperformed the S&P 500 during the past year.

7. JPMorgan Chase

JPMorgan Chase (NYSE: JPM) has been embroiled in several major scandals in recent years. In 2012, the company captured headlines with the so-called “London Whale” fiasco, in which a series of trades cost it billions of dollars. As a result, the company’s management and its risk controls were criticized.

Yet, as 2013 wore on, the scandals continued piling up. In October, the company agreed to pay a $13 billion settlement related to its actions — and those of acquisitions Bear Stearns and Washington Mutual — in off-loading poor quality mortgage-backed securities onto investors.

JPMorgan also became the focus of a scandal in China and Hong Kong, where it reportedly hired the children of Chinese elites to help facilitate the bank’s business in China. The new year has also started off poorly for the bank, which was fined for ignoring signs that Bernie Madoff was running a ponzi scheme. The mounting negative press has led many to call for CEO Jamie Dimon’s resignation.

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8. lululemon

lululemon was once one of the world’s most-promising retail companies. However, it has fallen on hard times. Shares are down nearly 20% in the past 12 months, compared with the S&P 500’s 25% increase.

lululemon was once the only game in town for yoga wear, clothing that has become extremely popular in the last few years. But larger clothing brands have begun eating away at the company’s market share. Shares are down more than 15% since the company cut its outlook for the fourth quarter and fiscal year in mid-December.

The company was embroiled in several public relations fiascos last year. After customers began complaining that one style of the company’s pants were see-through in certain conditions, lululemon issued a recall. The problems might have ended there had the company’s Chairman Chip Wilson not mentioned on television that the pants might not work on women of all sizes. In the ensuing fallout, Wilson resigned.

9. BlackBerry

The long and tragic decline of BlackBerry is a good example of how quickly a market leader can go astray. The grandfather of the smartphone industry has lost almost all of its market share to current leaders Apple and Samsung. As recently as 2008 the company was one of the largest sellers of smartphones in the world, with total unit sales more than double those of Apple. Since then, however, the company’s share of the mobile phone market has evaporated.

BlackBerry shares dropped by nearly 30% over the past year, while the S&P 500 gained more than 25%. Revenue in the third quarter was approximately $1.2 billion, down 56% from the year before. The company recorded revenue from 1.9 million smartphones in the period, compared to 6.9 million in the same quarter of the previous year, and the company lost $4.4 billion in the quarter. In contrast, Apple sold 33.8 million iPhones in its last reported quarter.

BlackBerry launched two new phones last year in a last-ditch effort to field a competitive product. Unfortunately, consumers ignored the Z10 and Q10, prompting the company to announce it was cutting one-third of its staff and taking an inventory write-down of roughly $960 million in its fiscal second quarter.

10. JCPenney

JCPenney has probably made more operational and strategic mistakes than any other large publicly traded company in America. Penney hired Apple’s retail chief Ron Johnson in November 2011 to replace longtime CEO Mike Ullman. Johnson implemented a series of marketing and merchandising strategies that not only failed to boost revenue but actually hurt sales — same-store sales and revenue fell roughly 25% in fiscal 2012. Same store sales failed to meet modest expectations in 2013.

The company then rehired Ullman as CEO in April 2013, despite his poor performance before Johnson joined. Since returning, Ullman has announced plans to reverse most of Johnson’s changes. Because of its sales failures and poor balance sheet, Penney is considered by many to be teetering on the brink of bankruptcy. The stock market has ravaged the stock, pushing down shares by 60% over the last five years.

JC Penney has also done poorly in the critical e-commerce sector. In the Foresee study of online retail customer satisfaction, Penney scored well down the list, a sign that it has an uphill battle to get consumers back.

 

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