Posted on 02/05/2014 5:01:07 AM PST by Red in Blue PA
CVS Caremark is kicking the habit of selling tobacco products at its more than 7,600 drugstores nationwide as it focuses more on providing health care.
The nation's second-largest drugstore chain said Wednesday that it will phase out cigarettes, cigars and chewing tobacco by Oct. 1, a move that will cost about $2 billion in annual revenue but won't affect its 2014 earnings forecast. CVS Caremark leaders say removing tobacco will help them grow the company's business of working with doctors, hospitals and other care providers to improve customers' health.
(Excerpt) Read more at finance.yahoo.com ...
Funny, I am old enough to remember when, if some Christian type, made such an announcement he was sneered at as some kind of out of it bluenose.
Then this is really about the government and it’s role, right? Corporations exist to produce wealth for their investors; if that involves them pandering to the government, even for things that the government shouldn’t be doing, then they are just acting within their nature.
The way I see it this is how things are supposed to work: CVS is looking at evolving their business model and tobacco doesn’t fit with that. So tobaccois going away. There will still be places where people can buy tobacco, because there’s still a market for it. Hopefully it’ll actually drive tobacco purchasers to their local mom and pop tobaccanist shop.
You don’t think there is any govt pressure on businesses in the background to get on board with these types of moves????
Check out Coca-Cola. They have obesity initiatives which are killing the stock price, yet they continue anyway. This is about companies putting govt initiatives above the shareholders.
Any time I see this, I sell immediately. IT NEVER WORKS.
The CEO should be fired!
I will never spend another dime there!
That’s between Coke and it’s shareholders, isn’t it?
19% of the population smokes. CVS is saying to 19% of the population that they don’t want their business. (and this does not include the business they will lose from people like me who are non-smokers but are pi&&ed t these types of moves)
If you think that is a good move in any way, then I have a bridge to sell you.
Whatever the case ... it’s CVS’ right to sell or not sell any particular product.
The govt is all for “healthy living” unless doing something such as making suppressors mandatory takes away from their power. I thought that would be obvious.
It sounds to me that they’re moving from a low margin offering (tobacco) to a higher margin one (health services). They’re saying that initially the increased revenue from the higher margin one will completly offset the los revenue from the ditched lower margin one. And in the long term, as tobacco use decreases while the need for health services increases, it’ll be more profitable.
In the absence of the details of whatever market research they have to support the decision, that’s not illogical or unreasonable.
Not sure I agree with you.
This appears to be CVS making a strategic call, and deciding that not selling a carcinogen will bring in more sales, than selling one will.
If I am wrong then I stand down, but this is what appears to me, to be a simple marketing decision.
As a (former) smoker I am in favor of CVS’ call on this.
Have a CVS store near me. Been told their average daily gross, excluding their pharmacy, is around $8,000.
Eliminating tobacco sales is certain to hurt this number.
Good analysis. Products come and go but the purpose of the BoD, Executive Mgmt, etc
is to make the largest profit margin that they can for the investors in line with the corporate
goals. That should be the guiding decision.
Would you prefer that the government force CVS to sell cigarettes?
Check Coca-Cola’s stock price if you think this will help CVS. Coke jumped into bed with the govt for their obesity initiative, and the stock has been a horrid performed during one of the longest runs of the stock market.
The CEO decided to serve the interests of the govt instead of the shareholders. IT IS THE DUTY OF THE CEO TO BE MORALITY NEUTRAL.
I can't believe that cigarette sales add a lot to their bottom line. They can't be a high margin item and I doubt that they comprise a lot of their total sales. But by loudly and publicly announcing that they won't sell them anymore CVS is reaping millions in free, positive publicity and probably not losing much in the way of income.
It’s the duty of the CEO to run the company in a manner that provides good return on the investments made by the shareholders.
If the CEO fails to do this, then the action to make any sort of a correction is in the hands of the shareholders.
I don’t see an apple apples comparison between CVS and Coke here anyways. Tobacco use is declining. The need for health services is increasing and will continue to do so. The former is low margin and the latter high margin, with the prospects of breakeven the first year and then increased revenue during the following years.
On that basis alone it looks like a logical and reasonable business move.
I know they had a recent CEO change and I think a woman is at the helm now.
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