CVS burned again by tobacco ban
Oct 30, 2015
By Chris Isidore
NEW YORK (CNNMoney)
Sales at CVS were once again burned by its decision not to sell cigarettes.
CVS Caremark reported that its general merchandise sales fell in the most recent quarter mainly as a result of its decision to pull cigarettes and other tobacco products from its shelves. due to their negative impact on health.
This was the fifth straight quarter that CVS took a hit to merchandise sales.
Still, total sales improved, climbing 10%, or $3.6 billion, thanks to a jump in spending on prescription drugs. But those drug sales face their own headwinds as several generic brands have hit the market in the last year.
In February 2014 the company announced plans to stop selling tobacco products, although it acknowledged at that time it would cost it sales. The ban took effect in early September last year, which means the year-ago period was only partly impacted by the loss of tobacco sales.
Despite the drop in general merchandise sales the company posted improved earnings, topping Wall Street expectations. But shares of CVS were down in 5% in early trading.
CVS banned tobacco. Now its sales are hurting
General merchandise sales tumbled nearly 8% last quarter
Aug 04, 2015
By Matt Egan
Sales at CVS Health are getting “smoked.”
Last September, CVS became the first major pharmacy chain in America to stop selling cigarettes and other tobacco products in its stores. The drug store chain said it was the right thing to do – even though it would hurt sales.
Now CVS is detailing just how much the tobacco ban is impacting the company. While prescription sales continue to rise, general merchandise sales tumbled nearly 8% last quarter on a same-store basis.
CVS blamed the slump on the tobacco ban. The company said front-store sales would have been flat compared with the year before if they didn’t make the change.
Conlumino analyst Stephen Ward believes that while the smoke ban was a “sensible move” for CVS’s brand, it has come at a cost. “It has most certainly affected sales both directly, and indirectly, through the reduction in impulse purchases that tobacco customers made,” Ward wrote in a report.
CVS stock dropped 3% on Tuesday after the company sounded cautious about the current quarter. The bar had been set very high as CVS shares have soared 40% over the past year and hit all-time highs just last week.
$2 billion hit to sales: The decline in front-store sales stands in stark contrast to the much larger prescription business. CVS said pharmacy sales jumped over 4% last quarter as
Americans continue to ramp up health care spending.
The fact CVS is hurting a bit from its tobacco ban is not shocking. When CVS first announced the move in February 2014, it warned sales could take a $2 billion hit. That’s just a fraction of the $139 billion in annual sales CVS generates, but it’s not nothing.
“By eliminating the sale of cigarettes and tobacco products in our stores, we can make a difference in the health of all Americans,” CVS CEO Larry Merlo said when the ban took effect last September.
To coincide with the smoke ban, CVS also changed its name from CVS Caremark to CVS Health.
CVS has room for improvement: CVS is clearly betting the move will improve its brand image, especially among the growing population of Americans who don’t smoke. Now the company is focused on selling more profitable items like beauty products.
CVS said it once again gained market share in its health and beauty categories last quarter.
Ward, the Conlumino analyst, believes CVS can offset its tobacco challenges by taking a page out of Walgreen’s playbook. He said CVS needs to step up its game by improving the general shopping experience, especially in the beauty category.
“The trick for CVS is to match momentum in retail with the momentum it has built up in its pharmacy business,” Ward wrote.
CVS Update
September 8, 2014
By Marc St. Stephen
When I first heard in the spring of 2014 that CVS Pharmacy was going to stop selling tobacco products, I thought, “eh, whatever”. I never bought tobacco products from CVS (that’s what my local tobacconist is for) and really wouldn’t give a wet slap if I saw or did not see a skimpy collection of tobacco items behind the counter at uncompetitive prices.
If this corporate decision ended there – I wouldn’t even be writing this entry. But it didn’t, did it?
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Now let’s be clear – this corporate decision has nothing to do with heath. If it did, CVS would immediately stop selling all other goods that are not good for you, such as candy, unhealthy foods, and alcohol – but they’re not.
Now chew on this – CVS also decided not to sell Vaping products. Yes, I understand that as of Februrary of this year (2014), CVS was in active negotiations to carry several brands of E-Cigs and Vaporizers. Shortly after their announcement of no longer selling tobacco products, all of those deals were summarily halted – but, oddly, not mentioned. Given that the decision to stop selling tobacco products was probably in the works for at least a year before the announcement, I can only guess that Big Pharma stepped in and said, “We’ll help fund the losses you might suffer on this decision, if you also include vaping products in the ban”
I’m quite sure that the shelf space that used to house tobacco products is now chock full of Big Pharma gums, patches and pills. Apparently, Big Pharma’s nicotine is okay. I’d guess that the suicide-inducing Chantix pills are okay as well.
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The CVS Foundation is giving a 5 million dollar grant to “Campaign for Tobacco Free Kids” – you know, that anti-smoking special interest group that epitomizes the use of “for the children” to take adult freedoms away.
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