CVS Caremark Corp announced on Wednesday, Feb. 5 that it plans to stop selling tobacco products at its 7,600 stores by October, Reuters reported.
CVS, the second largest drugstore chain in the U.S., is now the first national drugstore chain in the U.S. to take cigarettes off the shelf. Public health experts called the decision a precedent-setting step that could pressure other retailers to follow suit.
President Barack Obama, a former smoker, also responded to the decision. “Today’s decision will help advance my Administration’s efforts to reduce tobacco-related deaths, cancer, and heart disease, as well as bring down healthcare costs,” Obama said in a statement.
CVS, whose Caremark unit is a major pharmacy benefits manager for corporations and the U.S. government’s Medicare program, said the decision would strengthen its position as a healthcare provider, according to Reuters. “I think it will put pressure on other retailers who want to be in healthcare,” said CVS Caremark Chief Medical Officer Dr. Troyen Brennan.
“We believe this will have no impact on tobacco manufacturers as smokers will still buy cigs and other tobacco products—rather, they will simply go to other retailers, such as c-stores, dollar stores and tobacco shops,” according to Wells Fargo Securities. “Therefore, this is a positive for c-stores as we believe a portion of the 15% of total tobacco volume sold through drug stores and supermarkest will move to c-stores and other retailers, especially if more drug retailers follow suit and discontinue sales of tobacco products. Further, if more tobacco consumers are going into c-stores this bodes well for the c-stores’ other non-tobacco merchandise sales.”
Walgreen Co, the largest pharmacy chain, said it would still sell cigarettes for now but will continue to evaluate the product category.
“The company has been evaluating its tobacco line for ‘some time,’ and said it ‘will continue to evaluate the choice of products our customers want, while also helping to educate them and providing smoking cessation products and alternatives that help reduce the demand for tobacco products,’” Michael Polzin, Walgreens spokesperson told CSD.Walgreens has also announced a partnership with GlaxoSmithKline Consumer Healthcare to launch a free, Internet-based smoking cessation program called Sponsorship to Quit. The program will provide smokers with customized tools to track their progress in quitting smoking.
Third-ranked Rite Aid Corp did not immediately respond to a request for comment by Reuters.
CVS noted that the cost of eliminating cigarettes and other tobacco products would be about $2 billion in annual sales and six cents to nine 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 Reuters.
CVS executives told Reuters that the company would replace some of lost cigarette sales through smoking cessation programs at its pharmacies and through Caremark.