News In Brief

The Michelle Obama Effect

Christina Huh Oct 28, 2010

Image from the Harvard Business Review. Click image to see a larger version

According to a Harvard Business Review article, the First Lady has a greater effect on retail than many celebrities. There’s usually about an increase of 0.5 percent when a brand announces a new celebrity endorser; for one European tour, a stock index of all the brands Michelle Obama wore jumped up by 16.3 percent.

NYU business professor David Yermack tracked the stock prices of brands that Michelle Obama wears. He found that the effect she has is more than just a temporary tick in stock prices:

The stock price gains persist days after the outfit is worn and in some cases even trend slightly higher three weeks later. Some companies that sell clothes that Obama frequently wears, such as Saks, have realized long-term gains. Her husband’s approval rating appears to have no effect on the returns.

Michelle Obama may have even beat the French at their own game: French First Lady Carla Bruni-Sarkozy, who used to be a fashion model, doesn’t seem to have the same effect on retail. Yermack thinks it’s due to the fact that Obama mixes couture with more affordable items that people can pick up at the mall; Bruni-Sarkozy almost exclusively wears Christian Dior. Also, people may subconsciously trust the First Lady’s choices more, as she doesn’t endorse any brands, like many actresses or models do.

But just because Mrs. Obama wears a designer or brand’s clothing — even frequently — doesn’t mean that there will be instant and lasting success. One of her favorite designers, Chicago-based Maria Pinto, closed her retail store and stopped wholesale operations earlier this year.

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