Wal-Mart to Widows Will Feel U.S. Food Stamp Cuts From TodayAnnie Crist says she dreads telling her two daughters that cuts in food-stamp benefits taking effect today means less chicken and fewer hamburgers for dinner.
And with deeper cuts looming as part of a possible U.S. budget deal, Crist and other recipients may feel an even greater pinch -- along with retailers such as Wal-Mart Stores Inc. (WMT:US), Target Corp. (TGT:US) and Kroger Co. (KR:US)
“I don’t bother them or worry them with adult issues or adult problems,” Crist, a 30-year-old self-employed babysitter in Lancaster, Ohio, southeast of Columbus, said in a telephone interview. “But if they ask me, ‘Well, why can’t we get this? We always get this,’ how am I going to explain that?”
Food-stamp spending reached a record $78.4 billion in the fiscal year that ended Sept. 30, due in part to a temporary boost in benefits passed as part of the 2009 economic stimulus that expires today. Lawmakers battling over U.S. farm and budget policy are looking to cut deeper by tightening eligibility rules that could drop as many as 3 million people from the program.
With an estimated 8 percent of shoppers using food stamps, the impact will probably be felt most acutely by discount retailers such as Dollar General Corp. (DG:US), Family Dollar Stores Inc. (FDO:US) and Wal-Mart, said Bryan Gildenberg, chief knowledge officer of Kantar Retail.
“You’ll find the effects will happen quite quickly,” Gildenberg said. “These are shoppers that have probably already allocated their spending down to the dollar.”
Few Extras
Crist said her budget leaves little room for extras. The $547 a month she received in food benefits for herself and her daughters, ages 13 and 8, will become $497 today, as a roughly 5 percent benefit cut takes effect nationwide. With utilities and other expenses, she said she will be spending less on fresh meats, fruits and vegetables at the grocery store.
Grocers say they’re watching the situation closely. “We’re a little concerned about the food stamp cut, I can tell you that,” Dennis Eidson, president and CEO of Spartan Stores Inc. (SPTN:US), a Grand Rapids, Michigan-based grocer, said in a conference call Oct. 24. “That could be a meaningful event for us.”
Kroger, the biggest U.S. grocery chain, said it doesn’t expect the food-stamp drop to affect its sales. “Customers may shift to spending more of their cash on food and less cash on other things,” Keith Dailey, a spokesman for the Cincinnati-based company, said in an e-mail.
Monthly enrollment for what’s officially called the Supplemental Nutrition Assistance Program peaked last December at 47.8 million. It was 47.6 million in July, according to the most-recent data from the U.S. Department of Agriculture. That’s up from 28.2 million five years ago, when the program’s annual cost was $37.6 billion.
Feel Impact
“All retailers who sell food are likely to feel the impact of cuts, since people receiving assistance often don’t have excess income to make up the difference,” said Jennifer Bartashus, senior analyst for food retailing for Bloomberg Industries in Skillman, New Jersey.
Nearly half of all food stamp redemptions are in big-box supercenters such as Wal-Mart or Target while most of the rest are in supermarkets, she said. Of the total $72.9 billion in food stamps redeemed, $36.2 billion went to supercenters like Wal-Mart and Target and $25 billion to supermarkets, she said.
Stores with a higher portion of low-income customers will lose some revenue, though it could partially be offset by those trading down to discount-style stores, Bartashus said. The cuts could change shopping patterns for those on assistance toward store-brand items, which are generally cheaper than name-brand, she said.
Benefit Seen
Target spokeswoman Amy Joiner said in an e-mail that “we are monitoring the situation but aren’t going to discuss or speculate on impact to the business.”
Asked for comment, a Wal-Mart spokesman referred to remarks made by Chief Executive Officer Bill Simon on Oct. 15. Simon told analysts that the Bentonville, Arkansas-based company, which is the biggest U.S. food-seller and retailer, may see some benefits from the reduction.
“Price will become more important” as food-stamp recipients pay more nutrition costs out of pocket. “And when price is more important, we’re more relevant,” Simon said.
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