So much for sustainability moves denting profits.
CVS Health in the US managed record sales in 2014 – increasing net revenues by 9.9% to $139.4bn – despite a major rebrand that involved taking lucrative tobacco products off the shelves.
Last year, the pharmacy took the decision to stop selling cigarettes at its 7,000+ stores across the US. At the time, it said it expected to lose around $2bn in revenues every year.
But clearly it’s managed to offset the profitability impact.
Net revenues increased almost 13% to a record $37.1bn in Q4 2014, with operating profit jumping 4.7% to $2.3 billion.
“Our results underscore the fact that we are winning in the marketplace and, as a result, driving solid and sustainable growth,” said CVS Health CEO Larry Merlo. “2014 will be remembered as the year in which we rebranded our company as CVS Health and made the right decision to exit the tobacco category, better aligning our company with patients, payors and providers.”
It certainly seems like the right decision.
The business says it made up for its tobacco sale losses by increases in its pharmacy services business, which posted a 22% increase in revenues for the three months through 31 December 2014, driven largely by growth in its Medicaid programmes. On the first year anniversary of decided against selling tobacco, the CVS Health Foundation committed to a $5m five-year commitment to support the Campaign for Tobacco-Free Kids – a programme to provide grants to organisations “committed to implementing public health strategies to reduce youth tobacco use and exposure to secondhand smoke”.
CVS is the first pharmacy chain in the US to make a move against the powerful tobacco industry and Tobacco-Free Kids has publicly urged all retail and pharmacy outlets to end tobacco sales.
CVS Health has 7,800 retail pharmacies in the US, more than 900 walk-in medical clinics and boasts more than 65 million health plan members.