As the nation’s larger grocer, Wal-Mart Stores Inc. has plenty to lose come Nov. 1, when SNAP benefits — food stamps — are slashed by $4 billion annually. And the cuts come at a time when the retailer is facing flat sales growth.
Congress approved in 2009 a $45.2 billion stimulus into the program as part of the American Recovery and Reinvestment Act, which bumped up SNAP benefits through October 2013.
Analysts on Tuesday (Oct. 15) asked company officials about any potential impact to topline sales they expect from the shrinking SNAP benefits. Walmart U.S. CEO Bill Simon that he is “cautiously optimistic” the impact will be mild at the most. Simon said his opinion was based on the fact that sales did not materially rise when benefits were increased in 2009, so he doesn’t see a big impact with the 5% reduction.
“When consumers have less money, prices become more important,” Simon said, adding that Wal-Mart’s low price guarantee should resonate.
Food advocates like Marion Nestle have noted that Wal-Mart, Family Dollar and Dollar General are some of the biggest benefactors from the $78 billion funneled through the Supplemental Nutritional Assistance Program each year.
UPDATED INFO: Jack Sinclair, executive VP of grocery for Walmart U.S., told analysts this week that the retailer has an 18% percent of the EBT or SNAP market. That would equate to roughly $13.2 billion in sales annually. He estimated that only 8% of recipients even know there is a change coming. Sinclair, like Simon, said the reduction in benefits was an opportunity for Wal-Mart to grow its share.
SNAP is roughly 10% of the total U.S. grocery business, but benefits go to one in seven Americans, or some 48 million consumers. All of them will see their monthly benefits reduced on Nov. 1. For example, a family of four has been getting $588 per month in SNAP benefits since 2009, but that will be reduced by $36, or 5% after Oct. 31.
These cuts will hit Arkansas recipients to the tune of $52 million through September 2014 – money that retail grocers like Wal-Mart and Springdale-based Harps Foods will not see. Roger Collins, CEO of Harps, declined to comment on the SNAP cuts.
Over the past two years Wal-Mart has occasionally provided commentary about shopper habits timed around SNAP benefits being loaded onto the consumer cards. Simon has said cashiers across the country report young moms buying milk and other key staples at the stroke of midnight when the funds are loaded onto the cards.
He said consumers are resilient, but a fair number look to be financially strapped as they time their food purchases to the minute the funds become available.
Grocery is a $151 billion annual business at Wal-Mart driving 55% of the company’s total U.S. revenue last year. Wal-Mart controls about 25% of nation’s grocery marketshare, according to Michele Simon’s June 2012 report from Eat, Drink, Politics.
That report also notes that Wal-Mart controls more than 50% of the grocery marketshare in Tulsa and 28 other metropolitan areas. In 2011, the Tulsa World reported Wal-Mart received about 50% of Oklahoma’s $1.2 billion SNAP expenditures in the preceding 18-month period. Wal-Mart’s $506 million compared to $25 million received by Dollar General in that period, the report noted.
Four other grocers in Tulsa cumulatively collected $187 million in SNAP receipts. The Oklahoma data also found that SNAP receipts at Wal-Mart supercenters ranged from $15.2 million to $9 million between mid 2009 and early 2011. A smaller Neighborhood Market in Tulsa received $6.6 million, according to the report.
Michele Simon notes that data is scarce around SNAP receipts and deemed private by the U.S. Department of Agriculture. But, Massachusetts disclosed that in 2010 nine Wal-Mart supercenters in the state together received more than $33 million in SNAP dollars, which was four times the SNAP money spent at farmers markets nationwide.
Analysts said it may be too early to determine which retailers will feel the worst sting when the $4 billion SNAP benefits are gone, but it is another layer of pressure in a sector that operates on thin margins.