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CVS Quits Tobacco. Good Idea or Bad Business? - Real Time Insight

Posted
2/5/2014 3:04:00 PM
By: Zacks.com
Referenced Stocks:CVS;WAG

CVS Caremark ( CVS ), which operates more than 7,600 CVS/pharmacy stores, announced Tuesday morning that it will stop selling tobacco products at all of its locations . In the press release, CEO Larry Merlo stated that it "is the right thing for us to do for our customers and our company to help people on their path to better health" , and added that "the sale of tobacco products is inconsistent with our purpose."

The company estimates that it will lose approximately $2 billion in annual revenues from the "tobacco shopper" (CVS generated over $125 billion in revenue over the last 12 months), and it expects 2014 EPS to be negatively impacted by 6-9 cents.

However, CVS has indentified "incremental opportunities" to offset the profitability hit. So the company actually maintained its 2014 EPS guidance and its five-year financial projections provided in December at its Analyst Day!

Shares of CVS were down as much as -1.2% on Tuesday but recovered a bit by midday. CVS will report its Q4 results before the bell on Tuesday, February 11.

So what do you think of CVS's decision to stop selling tobacco products?

Is it bad for business since "tobacco shoppers" will likely just shop elsewhere? Or is it a good PR move that will ultimately benefit the company? Chime in below!



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