Shoppers Drug Mart Corp.'s brand name is losing some of its lustre. The country's largest drug-store retailer is grappling with some major issues, including new generic drug laws that are slicing its profits and the abrupt departure of its chief executive officer, Jurgen Schreiber.
Now the issues are starting to cut into how consumers view the brand - and its financial performance.
A study released on Tuesday from researcher Interbrand of New York shows that Shoppers' "brand value" has tumbled 17 per cent to $2.6-billion from two years earlier, even though it's still the top valued retail name in Canada.
Another factor fraying its brand image: increased competition from retailers rapidly expanding into the pharmacy business, such as giant grocer Loblaw Cos. Ltd. and discount titan Wal-Mart Canada Corp.
"It's as much a wake-up call as anything," said Alfred DuPuy, managing director of Interbrand Canada.
The study, called "Best Retail Brands 2011," underscores the challenge that even top retailers face in hanging on to their leading status. Through its own formula of measuring business' financial performance and brand strength, Interbrand assigns them each a brand value. The challenge is bound to become even more intense as savvy new foreign retailers - including U.S. discount giant Target Corp. - invade the Canadian retail landscape.
1. Shoppers: Down 17 per cent to $2.6-billion. Last year, Shoppers fought a high-profile but unsuccessful battle with the Ontario government in opposing its new drug rules. Now other governments are following suit with similar laws. Still, Shoppers has been a model for U.S. drug-store retailers, including its 9.5 million-member-strong Optimum loyalty program. It also benefits from its aggressive expansion into food, beauty products and electronics.
2. Canadian Tire: Up 3 per cent to $1.8-billion. Canadian Tire is catering more than ever to its core male customer by beefing up its traditional offerings of auto, hardware and sporting goods. To focus more on its core categories, it's building what it has dubbed "smart" stores as well as downsized outlets in smaller markets. It's also re-developing its Canadian Tire money loyalty program. Still, it's racing to carve out its niche more clearly in the increasingly crowded Canadian market. Earlier this month, it launched a new marketing campaign with the slogan "Bring it on," emphasizing the retailer's Canadian heritage.
3. Lululemon Athletica: Up 24 per cent to $943-million. The yoga wear retailer has become a phenomenon in North American retailing: demand for its athletic clothing is so strong that it can't keep its shelves stocked. As a result, it expects weaker-than-anticipated first-quarter results, which sent its stock tumbling a couple of weeks ago. On the other hand, the stock recovered this week after Jim Cramer of the Mad Money show on CNBC said Lululemon is "a high-octane secular growth story." As well, the retailer said on Monday that it plans a two-for-one stock split, which would make the shares more affordable.
4. Future Shop: (First ranking) $598-million. Owned by U.S.-based Best Buy, Future Shop is a destination for such electronics as televisions, computers, cameras and appliances in both bricks-and-mortar stores and online. But same-store sales have been soft recently as prices of popular computers and big-screen televisions ease up, and new products, such as three-dimensional TVs, fail to take off as much as expected.
5. Winners: (First ranking) $327-million. Owned by U.S. discounter TJX, Winners is riding the popular wave of low-cost products. It sells brand-name fashions at up to 60 per cent its regular retail prices. But Winners faces new competitors, including U.S. discounter Target, which plans to open its first stores in Canada by 2013. And it faces competition within, so to speak. Discounter Marshalls, which is also owned by TJX, is opening its first stores in Canada this year.