CVS, the nation’s second-largest pharmacy chain, said Wednesday it would stop selling all cigarettes and tobacco products nationwide by October, saying they have no place in a drugstore company that is trying to become more of a health-care provider.
The move is a bold and expensive one for CVS, a unit of CVS Caremark Corp.CVS +0.46% It reflects a major push by retail pharmacies away from simply dispensing drugs toward a more integrated role of providing basic health services to Americans—including millions of newly insured—amid an expected shortage of primary care doctors.
The news is another blow to the $100 billion tobacco industry that is wrestling with slumping sales, rising taxes, widening smoking bans and a resurgence of public-information campaigns on the perils of smoking.
For CVS, the move will be costly. The drugstore chain estimates it will forgo $2 billion in annual revenue from tobacco and other sundries as a result.
That hit on revenue will shave about six to nine cents a share off of operating earnings this year and about 17 cents annually from next year’s earnings.
CVS had expected earnings of $4.36 to $4.50 a share this year, with analysts projecting revenue of around $133 billion.
But CVS is counting on the strategy to give it a competitive edge over rival pharmacies in forging partnerships with hospitals, insurers and physician groups. These types of alliances are critical to drugstores like CVS and Walgreen Co. WAG +1.12% as they redefine themselves amid a downturn in prescription-drug sales.
CVS sees its future in making its in-store clinics a convenient health-care alternative to long waits at the doctor’s office, along with CVS pharmacists counseling patients. That goal was increasingly at odds with racks of cigarettes, cigars and chewing-tobacco residing behind the cashier’s counter, said Larry Merlo, chief executive, in an interview.