NEW YORK (TheStreet) -- CVS Caremark (CVS) has decided that it will no longer carry tobacco products in its stores. The company reasoned that by not carrying harmful products, it will increase the odds of signing deals with medical groups and insurance companies.
"I applaud the decision of CVS to drop tobacco," said TheStreet's Jim Cramer, co-manager of the Action Alerts PLUS portfolio manager. However, he's in the business of caring more about earnings per share. So Cramer is concerned many of CVS' customers will head over to Rite-Aid (RAD) instead.
Rite-Aid has had some very good quarters and has been aggressively pushing its private-label products, Cramer said. Another beneficiary could be Walgreen (WAG).
Cramer also suggested that investors look at Dollar General (DG), which introduced tobacco products last year. While the products have created poor gross margins for Dollar General, it's what the industry refers to as a "loss leader," or a product used to get customers in the door to buy other products.
CVS said the decision may initially cost the company $2 billion in annual revenue, leaving Cramer to conclude that investors may want to shift to these other companies.
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