Wal-Mart Will Stop Selling Cigarettes -- It's Only a Matter of Time

The recent move by CVS Caremark to stop selling tobacco products is leaving many to wonder if or when Wal-Mart will follow suit.

Feb 16, 2014 at 1:14PM

Wal Mart People Shopping In Aisle
Shoppers at a Wal-Mart store in North Miami, Florida. (Photo by Joe Raedle/Getty Images/Thinkstock.)

As long as cigarettes are legal, retail stores have every right to sell them. But at what point does a company claiming to be a champion of affordable health care lose credibility by continuing the practice?

That's the question Wal-Mart (NYSE:WMT), the world's largest retailer, needs to decide. And the pressure to do so increased with the recent announcement by CVS Caremark (NYSE:CVS) that it will stop selling tobacco products by the beginning of October.

"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 CVS's chief executive officer Larry Merlo. "Put simply, the sale of tobacco products is inconsistent with our purpose."

Should Wal-Mart follow CVS's lead?
To be fair, Wal-Mart and CVS are markedly different companies. Whereas CVS holds itself out as the "largest integrated pharmacy health care provider in the United States," Wal-Mart is instead a discount retailer that sells a wide range of merchandise, health and wellness products being one of many.

At the same time, however, the Arkansas-based company has pushed heavily into the health-care space as it anticipates heightened demand from the aging baby boomer generation. Indeed, every annual report over the past eight years has trumpeted its role in improving the health of its customers and associates.

The company went so far in 2006 as to claim that an "essential part of Wal-Mart's mission is to provide sustainable, healthy, value-oriented products to meet customers' needs." It doubled down in 2011 by saying it has an "enormous responsibility to lead on issues that make a difference for associates and communities ... [including] economic opportunity, sustainability, responsible sourcing, healthy living, and community involvement."

To the company's credit, it's considered halting the sale of tobacco products for more than a decade and even ceased the practice completely in its Canadian stores in 1994 when confronted with pressure from the government. But the one thing that has always stood in its way has been the company's commitment to shareholders.

Before becoming CEO, Doug McMillon, then head of the chain's Sam's Club unit, told The Wall Street Journal that halting cigarette sales is something he has "thought about." He nevertheless went on to note: "I don't expect it to happen in the next year. It's a big business, so it makes it harder to stop."

It's clear that Wal-Mart is stuck between a rock and a hard place. On one hand, I believe it's honestly committed to playing a positive role in society. Why would it not, considering who its customers are? But on the other, its board members and executives owe shareholders a fiduciary duty to be responsible stewards of the bottom line.

How will this play out? That remains to be seen, but I think it's less about if it will happen and more about when. And when that time comes, it's not Wal-Mart shareholders who will have reason to quiver. It'll be the tobacco companies.

Stocks that are beating Wal-Mart and making people rich
To learn about two retailers with especially good prospects, take a look at The Motley Fool's special free report: "The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail." In it, you'll see how these two cash kings are able to consistently outperform and how they're planning to ride the waves of retail's changing tide. You can access it by clicking here.

John Maxfield and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information