CVS' Tobacco Exit Doesn't Hurt Sales, Profits

WOONSOCKET, R.I. — In its first full quarter as a tobacco-free business, CVS Health Corp. saw front-end sales take a dip, but its specialty pharmacy sales helped boost profits.

According to The Associated Press, the drugstore chain reported that growing demand for expensive specialty drugs helped increase revenue from its pharmacy benefits management business by nearly 22 percent in the fourth quarter of 2014, to $23.9 billion. That helped offset a 7.2-percent decrease in revenue from the front end of its established drugstores — where tobacco products were previously sold.

CVS made headlines this time last year with news it would stop selling tobacco products by Oct. 1. The retailer actually made its last tobacco sale a month earlier than planned. The fourth quarter of 2014 was its first full quarter without tobacco.

CVS also officially changed its name from CVS Caremark Corp. to CVS Health Corp. to reflect its focus on health, as CSNews Online previously reported.

The company projected last fall that the move would cut earnings between 7 cents and 8 cents per share. But CVS executives said Tuesday they did a little better than expected after completing the first full quarter without tobacco, although they didn't elaborate on the earnings impact. CEO Larry Merlo said the company's revenue from the front end of its established stores would have climbed slightly if the tobacco impact was removed, the AP report stated.

Additionally, Forbes reported that during an earnings call Tuesday morning, Merlo said customers who used to buy cigarettes at CVS have "migrated to convenience stores and gas stations."

"2014 will be remembered as the year in which we rebranded our company as CVS Health and made the right decision to exit the tobacco category, better aligning our company with patients, payors and providers," Merlo said.

Woonsocket-based CVS operates approximately 7,800 locations.