Charles Payne

Dillard's Department store is the quintessential American success story that begun in 1938. By 1953, it was the leading store in Texas. The company grew rapidly, and eventually went public in 1969.

In the early 1990s, several complaints were filed about the mistreatment of, and racist attitudes toward customers and employees. The company's stock peaked at $50 in November of 1992. Thereafter, with all the lawsuits and media reports, the stock went down and continued to sink.

By the time management paid a $5.6 million settlement in July of 2001, the shares were changing hands at just $14.00.

In 2002, William T Dillard II (Chairman and CEO), began to turn the company around. The shares got back to $50 in May of 2011, and have been a juggernaut since hitting rock bottom at $2.50 in November of 2008.

There was more going on than accusations of racism. The store was also slow to discount or update its look, but I think their reputation hurt them for a long time.

Fast forward to 2013, when two of the hottest retail brands dissed consumers:

Abercrombie & Fitch (ANF)

-CEO Mike Jeffries

"In every school there are the cool and popular kids, and then there are the not-so-cool kids."

"Candidly, we go after the cool kids. We go after the attractive all-American kid with a great attitude and a lot of friends."

"A lot of people don't belong [in our clothes], and they can't belong. Are we exclusionary? Absolutely."

Lululemon Athletica (LULU)

CEO Chip Wilson, Nov 2013, explaining why their yoga pants could cause chafing, leading to a recall in March.

"Quite frankly, some women's bodies just actually don't work for it."

I am not surprised LULU has warned on guidance for the fourth time in the last five quarters. I think it is time management tries to figure out a way to get back into the good graces of their lost customers. Wall Street continues to like Abercrombie at lower levels, but I think it is too early to tell if ANF will make a strong turn around. In fact, there is no telling how long it may take; after all, it has taken ten years for Dillard's shares to recover after its fall.

To every business, the message is clear...

Charles Payne

Charles V. Payne is a regular contributor to the Fox Business and Fox News Networks. He is also the Chief Executive Officer and Principle Analyst of Wall Street Strategies, Inc. (WSSI), founded in 1991 which provides subscription analytical services to both individual and institutional investors.

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