Costco Reducing Tobacco Presence

The warehouse club store continues to remove cigarettes at some U.S. locations.

March 16, 2016

SEATTLE – Costco has been removing cigarettes from the shelves of some U.S. locations for several years, a practice that will expand to more stores in the coming months, The Street.com reports.

A recent earnings call with analysts indicated tobacco sales plummeted by a “low double digit” percentage as the chain “continues to eliminate tobacco SKUs from various locations.” The removal has been done without the fanfare of other retailers, such as CVS drugstores, which has loudly touted its new tobacco-free status.

Most of the tobacco removal has been at Costco’s business center warehouses. “Tobacco is a very low margin business, tends to have higher theft and is labor intensive in some cases (due to local municipality regulations). Further, we felt we could better use the space to merchandise other items,” said a Costco spokesperson who was not named in the article.

Currently 189 out of its 488 U.S. stores still sell tobacco, and the company doesn’t have plans to eliminate tobacco entirely “anytime soon.” However, Costco has said that sales of tobacco products as a percentage of total sales will be a low, single-digit percentage.

“CVS got rid of tobacco and it sure didn't hurt,” said Jim Cramer, who manages portfolios for Action Alerts PLUS. “But Dollar General took a lot of share when it did. Costco doesn't sell anything it can't make money on so I don't question their decision, but this could be another win for Dollar General.” 

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