It's Black Friday season. It is a jolly good time, to borrow from seasonal expressions, to return to one of our most viewed reputational competitions, WMT vs TGT (or for those who do not live and die by ticker symbols, Walmart vs. Target). At our last review in February 2011, things were not looking particularly good for either firm. Both were losing reputation and value - Target was dropping faster and its metrics were more volatile. Between the two, our money was on Walmart.

At that time, Walmart’s (NYSE:WMT) reputation had dropped over the trailing twelve months from the 88th to the 81st percentile according to its Steel City Re Corporate Reputation Index ranking. Economically, the company was underperforming the median of this peer group by 26.53%. Target (NYSE:TGT), as a point of comparison, had diminished in terms of reputational standing having dropped over the trailing twelve months from the 93rd the 76th percentile. Economically, the company was underperforming the median of this customer peer group by 21.4%.

One year later, Walmart is looking much better. Walmart’s reputation has climbed over the trailing twelve months from the 85th to the 90th percentile among the 137 companies in the Retail sector. Its trailing 26 week exponentially weighted moving average reputation volatility is 1.7% while its 12 week reputation velocity and reputation vectors were both 0% . These are indicators of a slightly accelerated rise in reputation value. Economically, the company is now outperforming the median of this peer group by 12.62%.

Target (NYSE:TGT), as a point of comparison, has improved marginally in terms of reputational standing having increased over the trailing twelve months from the 88th to the 89th percentile. Its trailing 26 week exponentially weighted moving average reputation volatility was 6.9% while it s 12 week reputation velocity and and reputation vectors were 2% and 3.9%. These are indicators of a much slower reputation transition. Economically, the company was outperforming the median of this customer peer group by .84%.

The relative change in intangible asset fraction in the two companies says it all. Walmart's intangible asset fraction is now greater than the median; and Target's isn't.

Readers of the Mission Intangible blog have an apparently insatiable hunger for updates on the Walmart v Target rivalry. Never mind that in the opinion of our data provider, they compete in separate sectors. So in the spirit of the television musical program, Glee, we present one of our periodic mash ups of 140 stores in a composite retail sector.

Within this custom peer group, Walmart’s (NYSE:WMT) reputation has dropped over the trailing twelve months from the 88th to the 81st percentile according to its Steel City Re Corporate Reputation Index ranking. Its trailing 26 week exponentially weighted moving average reputation volatility is 0.5% while its 12 week reputation velocity and reputation vectors are -7% and -0.1% respectively. These are indicators of a slow but steady erosion of reputation value. Economically, the company is underperforming the median of this peer group by 26.53%.



Target (NYSE:TGT), as a point of comparison, has diminished in terms of reputational standing having dropped over the trailing twelve months from the 93rd the 76th percentile. Its trailing 26 week exponentially weighted moving average reputation volatility is 12.6% while it s 12 week reputation velocity and and reputation vectors are -17% and -10%. These are indicators of a much more volatile reputation transition. Economically, the company is underperforming the median of this customer peer group by 21.4%



This past week, the top ranked firms in this custom retail mash up were Fielmann AG, AutoZone Inc., and Suburban Propane Partners L.P.

More than two weeks have passed since Target (NYSE:TGT) found itself facing incensed stakeholder with pitchforks upset by the ideology of the beneficiary of one of the company's political donations. Positioned broadly in the media as a reputation story, we took interest and found no measurable effect last week. We return again to see if there was latency to the reaction. And we hear - silence.

Turning to the Steel City Re Corporate Reputation Index metrics, Target continues its now 4-week trend of occupying the #1 reputation rank, the 100th percentile, relative to a peer group comprising 16 Department Stores. It has also continued to narrow the economic return gap relative to the median of its peer group, rising another 2%. All of which, in a purely quantitative sense, affirms our previous conclusion that the aforementioned incident, managed as it was with multiple apologies, was limited to a reputation non-event from Target's perspective.

Meanwhile, Walmart (NYSE:WMT) continues to face the looming threat of a reputation crisis tied to its historic labor issues that may overshadow the reputation it has been building around its committment to sustainability. So thought  we'd compare the two sets of reputation metrics by creating a custom peer grouping of 141 Retail companies. (We are only responding to your demand: our TGT, WMT, and Big Box retail blogs are the most widely read of our entire library.) 

Within this peer group, Target began the trailing twelve month period in the 89th percentile and is now in the 92nd percentile. It is underperforming economically the median of the custom peer group by 0.74%. In the second chart, we see that its exponentially weighted moving average (EWMA) reputation ranking volatility has been decreasing over the past quarter, and in the third chart, its most recent trailing twelve week reputation velocity is a positive 2 percentile points per quarter. In short, a good reputation holding steady with no evidence of material consequences from the incident.



Within this same peer group, Walmart began the trailing twelve month period in the 96th percentile and is now ranked in the 91st percentile. It is underperforming economically the median of the custom peer group by 19.12%. In the second chart, we see that its exponentially weighted moving average (EWMA) reputation ranking volatility, having climbed a bit at the end of the previous quarter, has been decreasing recently to a very low level, and in the third chart, its most recent trailing twelve week reputation velocity is a negative 1 percentile point per quarter. In short, a good reputation slowly and gently diminishing.  



Closing the loop on the original incident involving Target these past few weeks, there is no evidence that Walmart benefited in terms of either a boost in reputation or economic return.

In early July, Minneapolis-based Target Corporation (NYSE:TGT) made a $150,000 donation to a local business advocacy group, MN Forward. Six other Minnesota businesses, including Best Buy Co., Inc., (NYSE:BBY), followed suit with $100,000 gifts. MN Forward used the funds to run an ad supporting a socially conservative Republican candidate for Governor, Tom Emmer. The ad for Emmer, who faces an Aug. 10 primary, didn't mention that Emmer’s an outspoken opponent of gay marriages; rather, it focused on his opposition to taxes and spending.

The messenger apparently signaled more than the message. According to the Bloomberg Businessweek story, and what many claim is a self-inflicted reputation crisis,

gay-rights advocates saw the donation as a betrayal by Target, which has long cultivated support among gays by, for example, providing health benefits to domestic partners and sponsoring Twin Cities Pride, an annual celebration. Since the contribution became public, as required under Minnesota law, calls for a boycott and other protests have mounted on YouTube (GOOG) and Facebook. "We feel betrayed," says Jeffrey Henson of Portland, Ore., who started an anti-Target Facebook group that has almost 40,000 followers. Protesters have also stood outside Target stores with placards denouncing the company.

Target’s CEO, Gregg Steinhafel, issued three apologies since late July. The company has not commented on whether or not it will ask for the money back.

Politics aside, the question of interest to the Society is whether or not within all this noise there is a brewing crisis of reputation. According to the Society's lore, and the book, Mission: Intangible, there are three key business processes driving reputation value in the retail sector. These intangible assets are business processes that (1) promote ethical behavior, (2) deliver quality products (price is embedded in quality since it constitutes an expectation), and (3) advance sustainability. Walmart's issue with labor is an example of a reputation that is challenged in the ethical behavior department. But is a campaign contribution with an indirect link to a politically sensitive issue sufficiently material to impact reputation? And if it is so in some cases, can a company have a sufficiently resilient reputation to withstand the challenge?

Let's turn to the metrics. The Steel City Re Corporate Reputation Index does not reveal evidence of a reputation crisis arising from this event. Looking at a reputation metrics snapshot after the markets closed on the day of the rally, 5 August, neither Target nor Best Buy seem to show any material impact attributable to the political donation and the controversy arising.

Target’s reputation has been in the top slot for several months relative to the 16 peer companies in the Department Store sector. Being ranked in the 100th percentile  confers resilience, and so it is not surprising that the kerfuffle this past week, and the smoldering activity this past month, have had no apparent effect. This is confirmed by a quick peek at equity pricing. While TGT has been increasingly underperforming its peers with a -17% relative return over the trailing twelve months measured the week of the donation, and a -24% relative return on 5 August, it does not appear to be linked to the event. This past week, at the height of the protests, there was actually a small relative equity bump as TGT was underperforming the median of its peers by 25% the week before.

Yet even with a firm that may not benefit from reputation resilience, the event appears to been more smoke than fire. Best Buy’s reputation has been on a steady decline since late April when it peaked at the 76% percentile among the 124 companies in the Retailers sector. Over the past month, that decline continued with only a small step jump (drop) of two percentile points this past week. In terms of equity pricing, BBY has been underperforming its peer group for some time, but over this past week reduced that gap from -33% to -28%. In conclusion, based only on the above metrics, there appears to be no reputational consequence attributable to the political contribution.

But there is nevertheless a lesson. The event was not allowed to fester and apologies were quickly issued. As the Wall Street Journal summarizes, "The Target flap shows the potential downside for companies that want to get more involved in politics since a January Supreme Court ruling on campaign contributions. Brand-oriented companies, in particular, worry about getting embroiled in controversies that can tarnish their reputation."