With a new year comes a new report from brand-marketing experts Interbrand. Less than two weeks ago, the company released a list of its top 50 most valuable U.S. retail brands. Today I want to look at their top five choices and see if there's merit to their selections.
First things first -- we need to know what goes into Interbrand's rankings. Pardon the extreme simplification, but Interbrand requires prospective companies to have easily visible financial data, generate at least 50% of their sales from retail stores, and be profitable.
Once they pass this initial test, Interbrand looks at a combination of financial performance, the role of a company's brand, and the strength of its brand name to assign a "brand value." It's one of the few methods that look at both tangible and intangible aspects of brand strength.
Here are Interbrand's top five most valuable U.S. retail brands:
Change Since 2011
Wal-Mart (NYS: WMT)
Target (NYS: TGT)
Home Depot (NYS: HD)
CVS Caremark (NYS: CVS)
Best Buy (NYS: BBY)
If you've ever been curious as to just how dominant Wal-Mart is, then look at the gap between it and the No. 2 brand name on this list, Target. With a brand value nearly six times higher than Target, Wal-Mart uses its enormous balance sheet to undercut competitors' prices and instill in cost-conscious consumers the idea that it is the low-cost leader. Boasting $260 billion in U.S. sales, Wal-Mart accounts for 1.7% of the national GDP.
Target benefited from revamping its image in the 1990s under the leadership of current J.C. Penney CEO Ron Johnson and former executive vice president Michael Francis, who made the brand cool once again. Target doesn't have the 180-million-consumer cult following that Wal-Mart has amassed, but its loyalty rewards program headed by the REDcard and its larger move into the grocery aisle has cemented it as a brand favorite among many Americans.
3. Home Depot
You'll get no argument here from me with regards to America's do-it-yourself superstore. I recently profiled Home Depot as a great dividend stock you could buy right now, and for good reason --the company will benefit regardless of the outlook in the housing sector. Its business feeds off both the home remodel market and those who are unable to sell their home, as well as the commercial building market and those seeking to buy a new home.
4. CVS Caremark
I was personally surprised to see the CVS brand name ahead of Walgreen, to be honest. Walgreen recently slowed its growth rate to focus on retaining customers and increasing brand loyalty, so I figured that'd put it over the top -- but alas, no! CVS is betting heavily on mobile applications for the future and is streamlining its pharmacy and pharmacy-benefits management business to allow users easy access to placing prescription orders. I personally still prefer the Walgreen brand, which came in at No. 6, but can understand CVS appearing here.
5. Best Buy
Talk about hanging on by a thread. The slow death of the big-box retailer has been well documented of late and Best Buy's show-and-tell sales floor has been losing business to Amazon.com for years. Still, this is a company with a solid balance sheet, that's generating strong cash flow and a healthy dividend, and has grown revenue in each year over the past decade. Certain aspects of its business may be struggling (ahem... televisions), but there's strength in those numbers.
Do you agree or disagree with the above brand value rankings? Let your fellow Fools know in the comments section below and consider adding these five brand-name powerhouses to your free and personalized watchlist.
If you're interested in three more American brands that are set to dominate the emerging markets, then I suggest you download our latest free report, "3 American Companies Set to Dominate the World." Did I mention it's free?
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At the time thisarticle was published Fool contributor Sean Williams has no material interest in any companies mentioned in this article. He loves lists that factor in intangibles. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of Wal-Mart, Best Buy, and Amazon.com. Motley Fool newsletter services have recommended buying shares of Wal-Mart, Home Depot, and Amazon.com, as well as creating a diagonal call position in Wal-Mart and writing covered calls on Best Buy. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that's always the leader of the pack in transparency.
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