This is an awesome story.
When CVS Pharmacies cut out tobacco sales, everyone fully expected the company’s revenues to drop, including CVS. Instead, the opposite has happened.
In the fourth quarter of 2014, the first full financial quarter after CVS banned tobacco sales, the company’s revenues didn’t go down, they went up 12.9 percent to a record $37.1 billion.
Apparently, one of the reasons for the increase in revenues was the Affordable Care Act.
From this Forbes article:
CVS, which stopped selling cigarettes and related products in September, previously generated an estimated $2 billion in annual tobacco sales. But sales in the pharmacy segment alone in the fourth quarter jumped 21.7 percent to $24 billion buoyed by an early flu season with an ineffective vaccine that caused flu victims to search CVS for other treatment options. CVS also saw increased paying customers under the Affordable Care Act.
The newly insured Obamacare customers and increased drug sales helped overcome a dip in revenue from the front-end of the store where customers used to buy cigarettes and other tobacco products.
Also from the Forbes article:
The end of tobacco sales has improved the company’s image and helps in discussions attracting employers to its pharmacy networks and its prescription management business. In the fourth quarter, pharmacy benefit management sales were up 21.7 percent to nearly $24 billion.
The CVS decision has also put pressure on other retailers like Walgreens Boots Alliance (WBA) and Wal-Mart (WMT). “It’s opening up some doors to some unique opportunities,” CVS CWO Larry Merlo told analysts.