Costco Phasing Out Tobacco Sales
ISSAQUAH, Wash. — Another major retailer is exiting the tobacco business. However, unlike CVS Health Corp., Costco Wholesale Corp. has been quietly removing the products from its shelves.
The clear indication of Costco's move came during its recent second-quarter earnings call. During the call, the Issaquah-based company said sales of tobacco products fell by a "low double-digit" percentage as Costco "continues to eliminate tobacco SKUs from various locations," according to TheStreet.com.
A Costco spokesman told the news outlet the company began reducing cigarette stocks in some of its U.S. locations about three or four years ago, but did not widely publicize its plans. The decision was mostly business-related.
The retailer made it a special focus to pull tobacco products from Costco's business center warehouses, reducing the potential of large customers such as local convenience stores to have items delivered, TheStreet.com reported.
"Tobacco is a very low margin business, tends to have higher theft and is labor intensive in some cases (due to local municipality regulations) — further, we felt we could better use the space to merchandise other items," he said.
Costco doesn't believe tobacco will be pulled from all its warehouses "anytime soon," the report added. Less than 200 of the 488 Costco locations in the United States still sell tobacco.
The retailer's decision stands in marked contrast from CVS's much-talked about decision to exit the tobacco business. In February 2014, the Woonsocket, R.I.-based company announced it planned to completely remove tobacco products from all its stores by Oct. 1, 2014.
"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," explained Larry J. Merlo, president and CEO of CVS. "Put simply, the sale of tobacco products is inconsistent with our purpose."
The news drew reaction and applause from all corners, including from the White House. "I applaud this morning's news that CVS Caremark has decided to stop selling cigarettes and other tobacco products in its stores, and begin a national campaign to help millions of Americans quit smoking instead," President Barack Obama said shortly after the announcement in 2014.
In fact, it exited the tobacco business a month early, as CSNews Online previously reported.