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CVS to stop selling cigarettes

Posted: Wed Feb 05, 2014 7:21 am
by dualstow
They used to say, Buy on the fundamentals(?), sell on the news.

I applaud CVS for shedding its tobacco products. I think it's a beautiful thing. But, I'm also going to sell my shares this week if not this morning. Would you do the same? They're just a vendor, so it's not like some amazing new innovation is coming down the pipeline. Not from CVS.

Re: CVS to stop selling cigarettes

Posted: Wed Feb 05, 2014 7:47 am
by dragoncar
Well, if it's not profitable for them then this is a good development for the stock... why are they discontinuing?

Re: CVS to stop selling cigarettes

Posted: Wed Feb 05, 2014 8:01 am
by dualstow
I think it's a moral decision. They want to be a health care company, and cigs and health care of course don't mix well.
It was certainly a profitable part of their business.

Re: CVS to stop selling cigarettes

Posted: Wed Feb 05, 2014 9:39 am
by Kshartle
dualstow wrote: I think it's a moral decision.
Do you really believe that?

If that's the case....then they would be in violation of their duties to shareholders. Wouldn't that open them up to the risk of a class-action lawsuit if this move destroys shareholder value?

It's one thing to make a bad business decision. If you did it in good faith it's ok. If you destroy the value of the shareholders property because you personally don't like smoking.......that sounds crimminal.

Re: CVS to stop selling cigarettes

Posted: Wed Feb 05, 2014 9:56 am
by dualstow
Kshartle wrote:
dualstow wrote: I think it's a moral decision.
Do you really believe that?

If that's the case....then they would be in violation of their duties to shareholders. Wouldn't that open them up to the risk of a class-action lawsuit if this move destroys shareholder value?

It's one thing to make a bad business decision. If you did it in good faith it's ok. If you destroy the value of the shareholders property because you personally don't like smoking.......that sounds crimminal.
Yes, I believe that. But, it's also about rebranding (maintaining?) their image as a healthcare company. It's been reported that they're giving up $2 billion in sales, so it's got to be morality & branding.

Still, it's a small part of their overall sales, and I'm sure they plan on continuing to add value in other ways. (I did sell my shares this morning).
Re: class-action lawsuit: I don't know. I get lawyer letters all the time. It seems like they go after every single company whose share price falls. I throw them out unopened.

I don't think it's "criminal." CVS chooses what to sell and what not to sell.  But as I said, I sold my shares*. They will still get my money as a customer, and now I won't have to wait for the person behind the counter to find the right packet of cigs for the customer in front of me. "No, a little to the left. Up a bit..."
Actually, I use the self-checkout machines, but still.

*99% gain, 27% annualized. Not bad.

Re: CVS to stop selling cigarettes

Posted: Wed Feb 05, 2014 10:08 am
by Kshartle
dualstow wrote:
Kshartle wrote:
dualstow wrote: I think it's a moral decision.
Do you really believe that?

If that's the case....then they would be in violation of their duties to shareholders. Wouldn't that open them up to the risk of a class-action lawsuit if this move destroys shareholder value?

It's one thing to make a bad business decision. If you did it in good faith it's ok. If you destroy the value of the shareholders property because you personally don't like smoking.......that sounds crimminal.
Yes, I believe that. But, it's also about rebranding (maintaining?) their image as a healthcare company. It's been reported that they're giving up $2 billion in sales, so it's got to be morality & branding.

Still, it's a small part of their overall sales, and I'm sure they plan on continuing to add value in other ways. (I did sell my shares this morning).
Re: class-action lawsuit: I don't know. I get lawyer letters all the time. It seems like they go after every single company whose share price falls. I throw them out unopened.

I don't think it's "criminal." CVS chooses what to sell and what not to sell.  But as I said, I sold my shares*. They will still get my money as a customer, and now I won't have to wait for the person behind the counter to find the right packet of cigs for the customer in front of me. "No, a little to the left. Up a bit..."
Actually, I use the self-checkout machines, but still.

*99% gain, 27% annualized. Not bad.
I guess what I'm getting is it's not a decision based on the personaly morality of the board or company execs but part of a long-term business strategy. That makes sense, the other one seems silly and criminal

Re: CVS to stop selling cigarettes

Posted: Wed Feb 05, 2014 1:47 pm
by sophie
I wonder if they're planning to install urgent-care clinics staffed by NPs in their stores.  It would be pretty awkward to have an NP admonish a customer to stop smoking, then said customer goes to the counter to pay the bill and finds a display of cigarettes.  Of course the same applies to beer and wine, if that's sold in CVS stores as well (I don't remember if that's the case).

Re: CVS to stop selling cigarettes

Posted: Wed Feb 05, 2014 2:03 pm
by Kshartle
Simonjester wrote: will they stop selling nicotine gum, electronic cigarettes and other quit smoking/nicotine delivery systems as well?
No on the gum at least. The CEO was on CNBC today.

Re: CVS to stop selling cigarettes

Posted: Wed Feb 05, 2014 2:56 pm
by Ad Orientem
I too applaud this decision and believe it is mostly based on moral conviction. A rare example of such from a major business. If there is a really big upside to this from a business perspective I am not seeing it.

On a side note I see nothing even remotely hinting at criminality here, irrespective of the companies motives. They are business and are free to sell, or not sell, what they wish as long it is not against the law.

Re: CVS to stop selling cigarettes

Posted: Wed Feb 05, 2014 3:01 pm
by Kshartle
Ad Orientem wrote: I too applaud this decision and believe it is mostly based on moral conviction. A rare example of such from a major business. If there is a really big upside to this from a business perspective I am not seeing it.

On a side note I see nothing even remotely hinting at criminality here, irrespective of the companies motives. They are business and are free to sell, or not sell, what they wish as long it is not against the law.
The criminal action is that the board has a fiduciary duty to look after the interests of the shareholder. Ergo, debilerately destroying company value for a personal conviction about smoking.

From the interwebs:

A board member should not have a conflict of interest that may cause him to not have the company's best interest in mind. According to Lawyers.com, if a conflict exists, the board member needs to disclose it to the board so that the board may take any necessary actions. Each board member should put the benefit of the company ahead of any personal benefit.

So if they have a personal dislike for a product that the company sells and the decision is made to stop selling it, regardless of the impact to the company, they are putting their personal interests ahead of the firm and the shareholders to which they are responsible.....hence...criminal action.

Re: CVS to stop selling cigarettes

Posted: Wed Feb 05, 2014 3:10 pm
by Xan
The irony is awfully thick in here, what with Kshartle advocating criminal charges against somebody.

Re: CVS to stop selling cigarettes

Posted: Wed Feb 05, 2014 3:26 pm
by Kshartle
Xan wrote: The irony is awfully thick in here, what with Kshartle advocating criminal charges against somebody.
Ohhh I've written about corporations before and argued they are creatures of, by, and for the state.

If you hired someone to run your business and they stopped selling a successful product because they didn't like it and weren't thinking about your profit......what would you think of them? - obviously this is different from criminal charges.

Re: CVS to stop selling cigarettes

Posted: Wed Feb 05, 2014 3:28 pm
by Ad Orientem
Xan wrote: The irony is awfully thick in here, what with Kshartle advocating criminal charges against somebody.
LOL! But Kshartle may have a point if there were clear evidence that the move would have a significantly prejudicial effect on the business. I doubt that's the case here though.

Re: CVS to stop selling cigarettes

Posted: Wed Feb 05, 2014 7:04 pm
by dualstow
My generally feeling is that if you're not a shareholder, this is not a controversial move. Not like the founder of Domino's pizza giving his money to the anti-abortion cause. This is good PR all around. And smokers can still find cigarettes. Maybe the local tobacconists will thrive.

I just don't see it, KShartle. Even if it could be proven that they were hurting shareholder value, it's not embezzling. The lawyers could make any arguments they want, but wouldn't it come down to poor management? Seems closer to a civil case if there even is a case. The shareholders could push the CEO to bow out, but the new one could stick with the policy, and nothing is really gained.
sophie wrote: I wonder if they're planning to install urgent-care clinics staffed by NPs in their stores.  It would be pretty awkward to have an NP admonish a customer to stop smoking, then said customer goes to the counter to pay the bill and finds a display of cigarettes.
Hah. I don't think it would be that awkard, Sophie. CVS doesn't sell alcohol, but their aisles are lined with ice cream, soda and Reese's peanut butter cups. And some of the garbagey food they sell appeared fairly recently.

I'm not sure when drugstores started selling groceries and grocery stores started selling items from CVS' domain, but I don't like it.

I think you have a point, though, and maybe they're going to eventually phase out the sugary junk. Alas, this would also cut into sales.  ???

Re: CVS to stop selling cigarettes

Posted: Wed Feb 05, 2014 10:04 pm
by Bean
Lenina Huxley: Ah, smoking is not good for you, and it's been deemed that anything not good for you is bad; hence, illegal. Alcohol, caffeine, contact sports, meat...
John Spartan: Are you shitting me?
Moral Statute Machine: John Spartan, you are fined one credit for a violation of the Verbal Morality Statute.
John Spartan: What the hell is that?
Moral Statute Machine: John Spartan, you are fined one credit for a violation of the Verbal Morality Statute.
Lenina Huxley: Bad language, chocolate, gasoline, uneducational toys and anything spicy. Abortion is also illegal, but then again so is pregnancy if you don't have a licence.

Re: CVS to stop selling cigarettes

Posted: Wed Feb 05, 2014 10:12 pm
by Ad Orientem

Re: CVS to stop selling cigarettes

Posted: Thu Feb 06, 2014 4:54 am
by WildAboutHarry
Walgreens up 3%.  CVS down 1%.  Just sayin'.

[quote=I82start]will they stop selling nicotine gum, electronic cigarettes and other quit smoking/nicotine delivery systems as well?[/quote]

Or products containing high-fructose corn syrup?  Candy and sugary drinks?  Or goods made in overseas sweatshops?  Or coffee that is not "Fair Trade"?

This almost makes me want to start smoking.  Perhaps a pipe would look distinguished?

For some reason the CVS action makes me think of the "smug" episode of Southpark.

Re: CVS to stop selling cigarettes

Posted: Thu Feb 06, 2014 8:16 am
by sophie
MangoMan wrote:
dualstow wrote: CVS doesn't sell alcohol, but their aisles are lined with ice cream, soda and Reese's peanut butter cups.
That may be true where you live, but here in the Chicago metro area, CVS sells beer, wine, and liquor. So does Walgreens.
AWKWARD!!!!  No cigarettes, but here have some beer and Reese's peanut butter cups?  It makes the decision look like a heavy-handed PR move.  Although I should point out that unlike beer and candy, it's extremely difficult to "moderate" your smoking.  Cigarettes are one of the most addictive substances on the planet.

Re: CVS to stop selling cigarettes

Posted: Thu Feb 06, 2014 8:46 am
by dualstow
MangoMan wrote:That may be true where you live, but here in the Chicago metro area, CVS sells beer, wine, and liquor. So does Walgreens.
sophie wrote:AWKWARD!!!!  No cigarettes, but here have some beer and Reese's peanut butter cups?  It makes the decision look like a heavy-handed PR move. 
Baby steps.
WildAboutHarry wrote:This almost makes me want to start smoking.  Perhaps a pipe would look distinguished?
Charles Evans was a real man. ;-)

Re: CVS to stop selling cigarettes

Posted: Thu Feb 06, 2014 10:13 am
by dualstow
I just had a thought: they could have spun off separate stores, CVS Vice, containing the beer, Reese's and 'backy. Just keep it separate from the wholesome healthcare stores. I guess that's why I think it really is a moral decision.

Re: CVS to stop selling cigarettes

Posted: Thu Feb 06, 2014 11:54 am
by WildAboutHarry
dualstow wrote:I just had a thought: they could have spun off separate stores, CVS Vice, containing the beer, Reese's and 'backy. Just keep it separate from the wholesome healthcare stores.
Sign me up for some of that.

The current CVS online coupon list includes such healthful choices as Mars bars, Twix, Hershey's, 3 Musketeers, Spam (the quasi-food product, not the internet kind), etc.

And from the newspaper ad, great deals on Old Bushmills, Canadian Club, Crown Royal, Maker's Mark, Skinnygirl Vodka, Southern Comfort, and the great big 4-liter jug of Carlo Rossi wine.  10% off when you buy 6 or more bottles!  Although unless you live in AZ, CA, IL, KY, MI, NM, NV, or WI, you cannot partake of these deals according to the Ad's fine print.

This action by CVS smacks more of hypocrisy than morality.  I won't be shopping there any more.  Although they have a pretty good deal on Crown Royal :)
Simonjester wrote: riteaid has the same or better deals on booze, (and you can stock up on smokes and junk-food in the same stop). "available in CA "

CVS may be making a mistake, "the smug" market share is much smaller than the "don't tell me whats best for me" one...

Re: CVS to stop selling cigarettes

Posted: Thu Feb 06, 2014 1:04 pm
by dualstow
So are there any tobacco vendors whose shares we should be buying? And, thinking ahead, purveyors of booze?
I have held MO, PA PM and Diageo* for a long time now.

*That's dee-AHZH-ee-oh, not die-a-JEE-oh

Re: CVS to stop selling cigarettes

Posted: Thu Feb 06, 2014 1:50 pm
by Reub
I believe that Harry Browne addressed this in Fail Safe Investing. He said that one should never invest in stocks or funds because of their social altruism.

Re: CVS to stop selling cigarettes

Posted: Thu Feb 06, 2014 7:58 pm
by WildAboutHarry
[quote=dualstow]*That's dee-AHZH-ee-oh, not die-a-JEE-oh[/quote]

Guinness is in that stable, no?  Tempting...

Re: CVS to stop selling cigarettes

Posted: Thu Feb 06, 2014 11:04 pm
by dualstow
I think that's right, Reub, now that you mention it.
WildAboutHarry wrote:
dualstow wrote:*That's dee-AHZH-ee-oh, not die-a-JEE-oh
Guinness is in that stable, no?  Tempting...
Yep. www.diageobrands.com
By the way, that's Gwin-EHZ not- just kidding. :-)