Summary
CVS Caremark Corporation (CVS) announced a significant strategic shift in its business operations, deciding to cease the sale of all tobacco products across its more than 7,600 CVS/pharmacy stores by October 1, 2014. This decision, effective by the fourth quarter of 2014, marks a departure from traditional retail pharmacy offerings and aligns the company more closely with its core mission of improving health outcomes. Despite the elimination of an estimated $2 billion in annual revenue, the company reassured investors that this move will not negatively impact its previously issued financial guidance for 2014, including segment operating profit and earnings per share, nor its long-term five-year financial projections. The anticipated impact on 2014 earnings per share is estimated to be between 6 and 9 cents, with an overall revenue loss of approximately 17 cents per share. CVS stated it has identified opportunities to offset the profitability impact and sees this as a move that strengthens its position for future growth within the healthcare landscape.
Key Highlights
- 1CVS Health to discontinue sales of all tobacco products across its ~7,600 pharmacies by October 1, 2014.
- 2The decision aligns the company's retail operations with its health-focused mission.
- 3Estimated annual revenue loss from tobacco sales is approximately $2 billion.
- 4The move is expected to impact 2014 earnings per share by 6-9 cents.
- 5Total estimated earnings per share reduction from tobacco exit is approximately 17 cents.
- 6Company reassures investors that 2014 financial guidance (operating profit and EPS) remains unaffected.
- 7Company's five-year financial projections provided in December 2013 are also reaffirmed.
- 8CVS identified incremental opportunities to offset the profitability impact of the tobacco exit.