Walmart Is Removing Cigarettes in Some Stores. Philip Morris and Altria Stock Fall.

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Shares of cigarette makers fell Monday as

Walmart plans to end cigarette sales in some U.S. stores, The Wall Street Journal reported, citing people familiar with the matter. The news comes as

Altria Group was hit with a downgrade from RBC Capital Markets.

Cigarettes are being removed in various Walmart markets, including some stores in California, Florida, Arkansas and New Mexico, according to the people and store visits, the Journal reported.

Walmart (ticker: WMT), the world’s largest retailer in the U.S. and world, is removing tobacco products from select locations where it has decided to use the space more efficiently, a spokeswoman told the Journal.

“We are always looking at ways to meet our customers’ needs while still operating an efficient business,” she said. She declined to tell the Journal how many locations will continue to sell cigarettes but said Walmart isn’t halting all tobacco sales.

Barron’s has sent an email to Walmart asking it to comment on the story from The Wall Street Journal.

Sales of cigarettes are generally less profitable for Walmart than some otheritems sold near the front of stores such as candy, according to the peoplefamiliar with the situation.

Philip Morris International (PM) declined 2.1% on Monday and

Altria (MO) fell 3.1%. U.S.-listed shares of

British American Tobacco dropped 1.5%.

Interestingly, Walmart’s decision comes after it has taken steps to becoming a one-stop shop for healthcare in recent years. Back in 2014,

CVS Health (CVS) announced it would halt tobacco sales at its locations because it was at odds with its increasing focus on health.

Altria, which is focused on the U.S. market, had gotten an upgrade just last week from

Goldman Sachs, which argued that that domestic focus was an advantage in the current geopolitical climate.

However, RBC Capital Markets is feeling less optimistic. Analyst Nik Modi cut his rating on Altria to Sector Perform from Outperform, noting that after rising some 24% since the start of December, the stock reached his $53 price target.

He wrote that the shares got a big boost from investors switching to defensive names, but now there is “limited room for further outperformance.”

Modi is concerned that Altria’s market share already was feeling the pinch from inflation and high gas prices late last year, and these factors are likely to keep low-income consumers trading down to cheaper brands in the near future. He argued that the cigarette industry as a whole will see volumes near the lower end of its historical range this year because of inflation, somewhat offset by higher prices.

Write to Joe Woelfel at [email protected] and Teresa Rivas at [email protected]