10 Reasons CVS Will Stop Selling Cigarettes

This morning, the nation's second largest pharmacy chain, CVS Caremark, announced its decision to stop selling cigarettes by Oct. 1 of this year. Here are 10 reasons that likely encouraged it to do so.

Feb 5, 2014 at 6:30PM

G

Source: CVS Caremark.

While we've become desensitized to the facts about smoking, this one still surprised me: Even though smokers consume fewer cigarettes today than they did 50 years ago, their risk of developing lung cancer has gone up.

How could this be? According to a recent study published by the U.S. Surgeon General, "Changes in the design and composition of cigarettes since the 1950s have increased the risk of adenocarcinoma of the lung, the most common type of lung cancer."

When you take this into consideration, the decision by CVS Caremark (NYSE:CVS), announced this morning, that it will soon stop selling cigarettes in all of its 7,600 pharmacy stores across the country seems fitting -- for the record, the announcement has no bearing on e-cigarettes, which aren't currently sold by the chain.

"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," said Chief Executive Officer Larry Merlo. "Put simply, the sale of tobacco products is inconsistent with our purpose."

To be clear, this wasn't a nominal decision for CVS, as the company stands to lose an estimated $2 billion a year in forgone revenue. That would equate to a roughly 1.6%, or $0.17-per-share, decline compared to the last 12 months. In terms of the bottom line, moreover, it's expected to impact earnings per share by $0.06 to $0.09 in the current fiscal year -- though the company doesn't believe it will impact its five-year financial projections.  

At the same time, however, it's unquestionably consistent with CVS' position as the largest "integrated pharmacy health-care provider" in the United States. As the company's press release noted, "This decision more closely aligns the company with its patients, clients and health care providers to improve health outcomes while controlling costs and positions the company for continued growth." 

And along these same lines, it's also in line with the Surgeon General's recent findings about the health impacts of smoking, the 10 most significant of which are outlined below.

  1. Smoking has killed 10 times the number of Americans as the number of Americans who died in all of our nation's wars combined.
  2. More than 2.5 million people have died from diseases caused by exposure to secondhand smoke.
  3. Compared to people who have never smoked, smokers lose more than a decade of life.
  4. "The estimated economic costs attributable to smoking ... now approach $300 billion annually, with direct medical costs of at least $130 billion and productivity losses of more than $150 billion a year."
    G
  5. If we continue on our current trajectory, 5.6 million children alive today who are younger than 18 years of age will die prematurely as a result of smoking.
  6. "Each day, more than 3,200 youth (younger than 18 years of age) smoke their first cigarette, and another 2,100 youth and young adults who are occasional smokers progress to become daily smokers."
  7. More than 42 million American adults suffer from tobacco dependence.
  8. During the last 50 years, tobacco has killed more than 20 million people prematurely.
  9. "More than 100,000 babies have died in the last 50 years from Sudden Infant Death Syndrome, complications from prematurity, complications from low birth weight, and other pregnancy problems resulting from parental smoking."
  10. "At least 70 of the chemicals in cigarette smoke are known carcinogens. Levels of some of these chemicals have increased as manufacturing processes have changed."

So, what does this mean for you?

Aside from the health issues it's addressing, the decision by CVS raises at least two questions for stock market investors. The first is whether CVS itself will ultimately benefit from the decision. By the looks of its share price today, it appears as if investors aren't optimistic, as its shares are down by 1.6% in midday trading.

The second question concerns the impact on cigarette makers -- most notably Reynolds American (NYSE:RAI) and Altria (NYSE:MO), two of the highest-yielding dividend stocks on the S&P 500. While a spokesman for Altria brushed off the move, saying that "It is up to retailers to decide if they are going to sell tobacco products," there's simply no doubt that it could be devastating if larger retailers like Wal-Mart follow suit.

Although it's true that drugstores and general retailers account for only a small slice of the cigarette market, no more than 16% according to The Wall Street Journal, the symbolic significance can't be denied. It's for this reason, in turn, that investors in companies like Reynolds and Altria would be wise to watch the developments on this front closely.

Looking for dividend stocks that aren't menaces to society?
One of the dirty secrets that few finance professionals will openly admit is the fact that dividend stocks, as a group, handily outperform their non-dividend-paying brethren. The reasons for this are too numerous to list here, but you can rest assured that it's true. However, knowing this is only half the battle. The other half is identifying which dividend stocks, in particular, are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.

John Maxfield has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers