CVS says not selling cigarettes, tobacco products won’t make financial dent

Credit: Getty Images
CVS has announced it would no longer sell tobacco products by October. Credit: Getty Images

CVS Caremark Corp. said on Wednesday that it would stop selling tobacco products at its 7,600 stores by October, becoming the first national drugstore chain to take cigarettes off the shelf.

Public health experts called the decision by the No. 2 U.S. drugstore chain a precedent-setting step that could pressure other retailers to follow suit.

President Barack Obama, a former smoker, praised the move, saying CVS had set a powerful example.

“Today’s decision will help advance my administration’s efforts to reduce tobacco-related deaths, cancer and heart disease, as well as bring down health care costs,” Obama said in a statement.

CVS, whose Caremark unit is a major pharmacy benefits manager for corporations and Medicare, said the decision would strengthen its position as a health care provider.

“I think it will put pressure on other retailers who want to be in health care,” said CVS Caremark Chief Medical Officer Dr. Troyen Brennan.

Although some U.S. cities, including Boston and San Francisco, already ban the sale of tobacco products in pharmacies, advocates hope the voluntary move by CVS will have a ripple effect across other drugstore chains.

Walgreen Co., the largest pharmacy chain, said it would still sell cigarettes for now but will continue to evaluate the product category. Third-ranked Rite Aid Corp. did not immediately respond to a request for comment.

Some retailers stopped selling cigarettes years ago: Target Corp. decided to drop them in 1996, while East Coast supermarket chain Wegmans Food Markets did so in 2008.

Dr. Risa Lavizzo-Mourey, chief executive officer of the Robert Wood Johnson Foundation, which focuses on public health, said CVS had made “a bold, precedent-setting move because it acknowledges that pharmacies have become health care settings.”

Small financial impact

However, CVS said the decision would not make a big dent in its financial results.

The company said the cost would be about $2 billion in annual sales and 6 cents to 9 cents in profit per share this year. Analysts expect CVS to report 2014 revenue of $132.9 billion and earnings of $4.47 per share, according to Thomson Reuters.

Declining smoking rates, along with new competition in the last two years from the low-cost Family Dollar Stores Inc. and Dollar General Corp. chains, suggest prospects for tobacco product sales were shrinking at CVS. Dollar stores have far more locations and offer goods at lower prices.

“We believe the move will be viewed as a positive long-term decision by CVS, despite the near-term profit drag, as it paves the way for increased credibility with both health care consumers and payers,” ISI Group analyst Ross Muken wrote in a note.

Matthew Myers, president of the Campaign for Tobacco-Free Kids, said CVS’s announcement could help lead more people to quit smoking.

U.S. cigarette sales fell 31.3 percent between 2003 and 2013, according to Euromonitor International.

Although adult smoking rates have fallen from 43 percent of Americans in 1965 to 18 percent currently, the habit remains the leading cause of preventable death in the United States, killing more than 480,000 people each year.

Last month, the American Lung Association and other advocacy organizations called on political leaders to commit to cutting smoking rates to less than 10 percent of the population in a decade and to protect all Americans from secondhand smoke within five years.

Focus on health care

The decision by CVS comes on the heels of several recent deals bolstering the company’s position in the health care market.

CVS in December said it expected its pharmacy benefit manager revenue to rise between 7.25 percent and 8.5 percent in 2014, easily outpacing growth of 2 percent to 3.25 percent in its retail business.

In December, CVS and pharmaceutical distributor Cardinal Health Inc announced a 10-year agreement to form the largest generic drug sourcing operation in the United States. A month earlier, CVS said it was buying Coram LLC, Apria Healthcare Group Inc’s specialty infusion services business.

CVS executives said the company would replace some of lost cigarette sales through smoking cessation programs at its pharmacies and through Caremark.

The company said the programs would be also be a key selling point as it tries to land more corporate contracts this year.



News
Entertainment
Sports
Lifestyle
International

Dinosaurs could have survived asteroid strike

It turns out there is a good and a bad time for the planet to be hit by a meteor, and dinosaurs were just unlucky.…

National

OkCupid admits to Facebook-style experimenting on customers

By Sarah McBrideSAN FRANCISCO (Reuters) - OkCupid, a top U.S. matchmaking website, intentionally mismatched users to test its technology, the IAC/InterActive Corp service said on…

Local

MTA fares still increasing 4 percent in newly…

The agency said the 4 percent increases, previously announced in December, will remain steady even as the MTA deals with increasing labor costs.

Local

De Blasio, Bratton defend city's efforts after Eric…

Mayor Bill de Blasio justified the city's response to the death of Eric Garner, a Staten Island man who died while in police custody earlier this month.

Movies

Interview: Brendan Gleeson on the way 'Calvary' depicts…

Brendan Gleeson talks about how his new film "Calvary" began over drinks and how his character here is the opposite of the lead in "The Guard."

Movies

'Get on Up' producer Mick Jagger on the…

Mick Jagger, a producer on the James Brown biopic "Get on Up," talks about the time had to tell the singer some bad news and his favorite JB record.

Television

'Glee' star Lea Michele to appear on 'Sons…

"Glee" star Lea Michele has been confirmed as a guest star in the final season of "Sons of Anarchy."

Television

TV watch list, Monday, July 28: 'The Bachelorette'…

See Andi Dorfman make her big choice on tonight's 'Bachelorette' finale.

NFL

Larry Donnell has inside track in Giants tight…

Little-known Larry Donnell of Grambling State currently has the inside track, as the second-year player has received the bulk of the first-team reps.

NFL

Computer to Jets: Start Michael Vick over Geno…

Jets general manager John Idzik says the choice of who starts between second-year quarterback Geno Smith and veteran Michael Vick will be a “Jets decision.”

MLB

Yankees looking to trade for Josh Willingham: Report

CBS Sports’ Jon Heyman reported Sunday the Yankees are interested in Twins outfielder Josh Willingham.

MLB

Joe Torre: I'm in Hall of Fame because…

Joe Torre spent 18 years putting together a near Hall of Fame career as a player. But it was the 12 years he spent as…

Travel

Glasgow: Hey, hey, the gangs aren't here

This European city has done a good job getting rid of its more violent residents and revitalizing with artists.

Education

Babson College tops list of best colleges for…

Money magazine has just released its inaugural list of "The Best Colleges for Your Money" -- and the answers have surprised many. Babson College, which…

Education

NYC teens learn how to develop apps during…

Through a program sponsored by CampInteractive, the high schoolers designed their own community-focused apps.

Tech

The Ministry of Silly Walks app is both…

Monty Python have dug into their back catalogue for cash-ins once more, but with the Ministry of Silly Walks app, they've made something that's fun too.