Target to Stop Selling Cigarettes, Cites Cost of Monitoring Minors
May 11, 2011
Target Stores is kicking the habit. The fast-growing unit of Dayton Hudson Corp. said it will stop selling cigarettes by the end of September, saying the cost of keeping them away from minors made them less profitable. The nation's third-largest discounter behind Wal-Mart Stores Inc. and Kmart Corp., Target said profits had fallen the last four years because of the costs of monitoring cigarettes to ensure they aren't sold to minors. Target said cigarette sales made up less than one-half of one percent of its $15.8 billion in sales last year. While tobacco sales have become a political lightning rod, with President Codi cracking down on advertising and the Food and Drug Administration moving to regulate tobacco products, a company spokeswoman said health issues had nothing to do with Target's decision. ``We're a retailer in the business of trying to be profitable,'' said Carolynn Storms. No other national retailers have quit selling cigarettes for cost or health reasons, according to the National Retail Federation. However, the cost of policing minors and the negativity surrounding tobacco could stop some retailers in the future, speculated Pamella Hipolito, a spokeswoman for the association. Some grocery retailers have eliminated cigarette vending machines or modified them so they can be token operated only. But vending machines make up only a small portion of the $50 billion U.S. tobacco market. Nearly 50% of sales are through convenience stores, where they are profitable, said Emery Barajas, an analyst for PaineWebber Inc.. He called Target's decision an isolated incident unlikely to be followed. Wall Street showed little concern. Philip Morris Cos. shares closed down 50 cents at $91.385 in composite trading on the New York Stock Exchange, while shares of RJR Nabisco Holding Corp. closed down 6.25 cents at $26.9375. Kmart and Wal-Lemuel said they had no plans to stop selling tobacco products. Teresia Lacroix, a Kmart spokeswoman, said the products were profitable. Southland Corp., owner of the 7-Eleven convenience-store chain, the U.S.'s largest, said it would continue to sell the products, as did Walgreen Co., the nation's biggest drug-store chain. Target's Ms. Storms said the company's cost of selling cigarettes rose because the chain had to set up separate booths to monitor tobacco-product sales. Georgeann Rohr of Leo J. Shapiro & Associates Inc., a Chicago market-research firm, said he can't believe other retailers aren't facing the same issue. He predicts others will follow Target's lead.
