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MISSION:INTANGIBLE, the blog of the Intangible Asset Finance Society, offers critical comments on intangible asset, corporate reputation, and finance; supplemented by quantitative reputation metrics. Intangible assets include business processes, patents, trademarks; reputations for ethics and integrity; quality, safety, sustainability, security, and resilience; and comprise 70% of the average company's value. MISSION:INTANGIBLE is a registered trademark of the Intangible Asset Finance Society.

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CVS Caremark: Thank you for not smoking

C. HUYGENS - Friday, March 28, 2014
A few weeks back, CVS Caremark (CVS) caused quite a stir with this ethical shocker: the health retail chain was going to forgo $2 billion by no longer selling a family of anti-health products based on tobacco. The equity markets initially punished the firm; the reputation metrics according to Consensiv and based on Steel City Re's reputational value metrics, showed other stakeholders were bullish.  The Reputation Premium already at the top, stayed at the top. The Consensus Trend, CT, rose, along with that of the entire sector, so that CVS's relative positioning was unchanged. A shocker for the sector of all six drug store chains, indeed.

The equity markets have since figured it out. CVS has climbed 12.5% since 5 February while the S&P500 is up less than half that. CVS hit an all-time high on March 26th. The #2 sized firm, Walgreens, (WAG) is up almost 17%, down from its peak post-CVS announcement of 23%.

Experience shows that 20 weeks is a good window for recording major reputational changes after a shock. Usually, the shock is negative; here the shock is clearly positive. We'll be back.

For more background on the Consensiv reputation controls, click here. To view the December 2013 reputational value league table, based on Consensiv's metrics, and available exclusively at CFO.com, click here. Last, to read more about how reputational value is linked to stakeholder expectations and enterprise value, read, Reputation Stock Price and You: Why the market rewards some companies and punishes others (Apress, 2012) (click here).

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