When CVS decided to stop the sale of cigarettes many predicted problems due to the profits and associated sales tobacco brings to the stores. Sales did decline, but something else happened as well.
Per
Forbes:
http://www.forbes.com/sites/briansolomon/2014/08/05/cvs-suffers-after-quitting-cigarettes-but-pharamacy-saves-the-day/CVS Suffers After Quitting Cigarettes, But Pharmacy Saves The DayWhen CVS Caremark CVS -0.13% announced in February that it would stop selling tobacco products, the company knew the bold move would impact the bottom line.
As CVS clears out cigarette shelves, they’ve seen the results: the loss of cigarettes has driven down sales significantly. “Front store” same store sales (i.e. the retail end) declined 0.4% in the second quarter, even with the positive impact of the shift of the Easter holiday into this quarter. CVS reported that front store sales would have been about 110 basis points higher if tobacco were excluded.
But, lucky for CVS, the company has a strong pharmacy business that’s more than picking up the slack. Pharmacy same store sales were up 5%, pulling up total same store sales to 3.3% against the same period last year. Total revenues in the retail pharmacy segment grew to $16.9 billion, or just under half of the company’s overall sales ($34.6 billion).
CVS saw even stronger growth in its pharmacy services business, which increased 16.2%, or $3.0 billion, to $21.8 billion. That helped the company post adjusted earnings per share of $1.13, up 16.5%. That beat analyst expectations of $1.10.
CVS also raised earnings guidance for 2014 to a range of $4.43 to $4.51 a share from $4.36 to $4.50 a share. The stock rose slightly in Tuesday morning trading and is now up about 8.4% year to date.
