Costco ‘Quietly Removing’ Tobacco SKUs

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Costco ‘Quietly Removing’ Tobacco SKUs

03/16/2016

The retailer suggested its actions on a recent earnings call, when it said sales of tobacco products fell by a “low double digit” percentage as it continues eliminating tobacco SKUs from various stores. However, Costco doesn’t believe it will pull tobacco from all its warehouses “anytime soon.” At the moment, 189 of Costco’s 488 U.S. stores continue to sell tobacco.

RL’s take: As a Costco spokesperson stated, tobacco is a business with low margins, higher risk of theft and intensive labor requirements, and it’s likely Costco will exit the category altogether. The long-term benefits will outweigh the short-term backlash from shoppers who smoke, as they’ll likely just purchase their smokes elsewhere. Moreover, Costco is smart in not announcing the move, which likely would result in commotion from shoppers who otherwise might not even notice.