What’s happening at CVS Caremark is an emerging business case study in visionary leadership.
CVS made headlines for its decision to discontinue selling cigarettes, capturing the gratitude of many people, including the White House.
There was chatter among analysts that this move will trim $2 billion from the company’s revenue, a fact that only seemed to add to the feelings of goodwill among current and potential customers. The widespread response from consumers was, “This is a wonderful thing that CVS did. They didn’t have to do it. They’re doing it not in the best interest of the business, they’re just doing the right thing.”
From a PR perspective, it created a real sense of warm fuzzies towards CVS, increasing pressure on other chains like Walgreens and Rite Aid to follow suit. It has been assumed that management calculated that goodwill towards CVS would result in more customers and more foot traffic, and eventually these new customers will replace the lost revenue. (In fact, trimming $2 billion in revenue, while meaningful, likely will have a modest effect on the stock price. It reflects less than 2% of total revenue, and its contribution to net income is roughly $70 million. Given that the new policy won’t even take effect until October, it will have negligible impact on 2014 company performance.) Read Full Article Now »