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CVS ends tobacco sales, but rivals aren't following

The company expects to lose roughly $2 billion a year from the decision
CVS pulls all tobacco products from store shelves 01:06

CVS (CVS), the nation's second-largest pharmacy chain, said it has stopped selling tobacco products, moving up the date by nearly a month after announcing earlier this year that such sales conflicted with its mission as a drugstore.

For now, however, CVS stands alone among retail pharmacy operators in ending tobacco sales, a move the company says will cost it about $2 billion in annual sales. Walmart (WMT) and Kroger (KR) have informed Ohio Attorney General Mike DeWine that they would continue selling cigarettes and similar products, according to a spokesman for DeWine, who has joined some two dozen state legal officials around the U.S. in pressing drugstores to stop selling tobacco products.

Anti-tobacco activists are also stepping up their efforts to persuade the companies to quit the tobacco business.

"We are going to ramp up the pressure and attention," said Paul Billings, senior vice president for education and advocacy at the American Lung Association, highlighting the positive public response to CVS' decision to stop selling tobacco. "This really resonates and strikes a powerful chord with the American people... They shouldn't be selling poison along wide of medicine."

AMA commends CVS decision on tobacco products 07:41

Although CVS will take a sizable revenue hit as result of halting tobacco sales, the products represent a small fraction of the company's overall sales, which are expected to top $137 billion this year. CVS shares were up slightly in early afternoon trading, recently trading hands at $80.43.

Walgreen (WAG), the largest retail pharmacy operator, questions whether having retailers quit selling tobacco products would improve public health.

"With about 250,000 retail establishments selling tobacco products in America today, retail pharmacies comprise only 4 percent of overall tobacco sales," the company said in a statement. "As a result -- as many health experts and even a recent doctor survey have noted -- a retail pharmacy ban on tobacco sales would have little to no significant impact on actually reducing the use of tobacco."

CVS CEO on banning the sale of tobacco 04:22

Walgreen, which has more than 8,100 locations across all 50 states, also sells e-cigarettes. CVS doesn't offer these products, but they are widely available in pharmacies and convenience stores around the U.S. Sales of e-cigarettes, which vaporize tobacco instead of burning it, are expected to surge 13-fold over the next decade as demand for traditional cigarettes falls, according to Reuters.

A Rite Aid (RAD) spokeswoman told The New York Times that the third-largest pharmacy chain would "continue to evaluate its products and services," without being more specific.

Rite Aid and Kroger, the country's largest grocery chain, did not respond to a request for comment. A spokesperson said Walmart isn't changing its policy on cigarette sales.

CVS' decision to quit selling tobacco products is part of a broader strategy to remake itself into a health care company. It has changed its name to CVS Health to emphasize the point. The operator of 7,700 stores is expanding its walk-in clinic business that treats patients for minor ailments and injuries. It also wants to expand its pharmacy management business.

Note: This story was updated on Wednesday at 6:43 ET to clarify Walmart's stance on cigarette sales.

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