CVS Stops Smoking

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

February 7, 2014

Although adult smoking rates have fallen from 43 percent of Americans in 1965 to the current 18 percent, smoking remains the leading cause of preventable death in the United States, killing more than 480,000 people each year.  CVS’s recent announcement to remove cigarettes from their offerings fits perfectly with their strategy to promote health and reinforce their move to compete with supermarkets.

CVS Caremark Corp said earlier this week that it would stop selling tobacco products at its 7,600 stores by October, becoming the first US drugstore chain to take cigarettes off the shelf.  Public health experts called the decision by the No. 2 US drugstore chain a precedent-setting step that could pressure other stores to follow suit.  The Lempert Report believes this will provide another impediment to people smoking.  

Although some cities, including Boston and San Francisco, already ban the sale of tobacco products in pharmacies, advocates hope CVS' voluntary decision will have a ripple effect among other pharmacy chains.  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. Molly Stones the West Coast chain decided to stop selling cigarettes in 2006.

It is also interesting to note that US cigarette sales have fallen 31.3 percent between 2003 and 2013, according to Euromonitor International. 

The average drugstore chain makes 14 percent profit on selling cigarettes – but this is even lower when you think of the high labor that goes into selling just one pack- checking ID, unlocking the glass displays where they are located – as well as the prime selling space they occupy. Replacing this display with higher profit, impulse snacks and quick grabs would boost profits and be much faster to sell.

In 1990 airlines banned cigarette smoking and they led the way for all airlines to follow the same ban. Question is if CVS’s competitors will follow suit, or just see this as an opportunity to sell more cigarettes. 

Note: CVS said it will lose about $2 billion in annual sales and between 6 and 9 cents of profit per share this year. Analysts expect the company to report 2014 revenue of $132.9 billion and a profit of $4.47 per share, according to Thomson Reuters.

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