Costco is slowly ditching one major category
Srdjan Zivulovic/ReutersA man taps ashes off his cigarette into an ashtray overflowing with cigarette butts on a table.Costco is quietly phasing out tobacco from stores across the US.
The discount retailer began reducing the presence of cigarettes in some some US locations about three or four years ago, a Costco spokesperson told The Street, but has not widely publicized its plans.
Tobacco's slow exit from Costco's shelves is more of a business decision than a public health campaign. Tobacco is a low-margin business, that results in increased theft and more work for employees, according to the spokesperson.
In the company's last earnings call in early March, Costco CFO Richard Galanti said that tobacco sales had dropped in the low-double digits as the company continued to eliminated tobacco items at various locations.
Out of 488 Costco locations in the US, 189 still sell tobacco, reports The Street.
REUTERS/John Gress JG/GN
In 2014, CVS announced plans to remove all tobacco products from its 7,600 pharmacies nationwide.
"We've come to the decision that cigarettes have no place in an environment where healthcare is being delivered," said CVS CEO Larry Merlo.
CVS says that its decision to ban tobacco products led to a 1% decrease in cigarette sales in certain states. While the cut lead to general merchandise revenue falling 7.8% in the second quarter of 2015 compared to a year earlier, the company has benefited from a strategic PR boost as CVS builds its pharmacy benefit manager business.