CVS, operator of 7,600 pharmacy stores in the U.S., would be the first national pharmacy chain to take this step, the Woonsocket, Rhode Island-based company said in a statement today. The decision will cut annual revenue by about $2 billion, equating to 17 cents a share, CVS said.
The move comes as public health officials try to educate about 42 million U.S. adult smokers about the dangers of the habit. Last month, a report from the acting U.S. Surgeon General, Boris Lushniak, criticized the "fraudulent campaigns" by cigarette companies, weaknesses in regulation and a rebound in smoking depicted in Hollywood films. The study, which came half a century after smoking was first linked to lung cancer, cited new evidence that common ailments such diabetes, arthritis and impotence can be linked to tobacco use.
"Anytime a company puts public health and the long-term good ahead of short-term profit, it's sort of an eye opener," Ross Muken, a New York-based analyst at ISI Group, said in a phone interview today.
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The impact for 2014 earnings per share for will be 6 cents to 9 cents following the change, CVS said. The company has identified "incremental opportunities" to offset the profitability impact, according to the statement.
Obama response
"Ending the sale of cigarettes and tobacco products at CVS/pharmacy is the right thing for us to do for our customers and our company to help people on their path to better health," Chief Executive Officer Larry J. Merlo said in the statement. "Put simply, the sale of tobacco products is inconsistent with our purpose."
President Barack Obama applauded CVS's move.
"As one of the largest retailers and pharmacies in America, CVS Caremark sets a powerful example," he said in a separate statement. "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."
CVS's shares fell 1.8 percent to $64.90 at 8:18 a.m. in early trading in New York. The stock had advance 48 percent last year.
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