For Wal-Mart, food stamp cutback adds new challenge

Food stamp cutbacks pose a challenge for Wal-Mart
Food stamp cutbacks pose a challenge for Wal-Mart

For Wal-Mart to generate sales growth this year, everything needs to go its way.

Yet as new qualification requirements roll into effect for the Supplemental Nutrition Assistance Program, as many as 1 million low-income shoppers are about become more tightfisted with their spending — something that is likely to take a nibble out of revenue at the world's largest retailer.

Starting in 2016, unemployed food stamp applicants between 18 and 49 years old, who are not disabled or raising minor children, will only qualify for the program for three months during a three-year period. That means in some states, those consumers who no longer qualify for SNAP lost their benefits April 1.

According to the nonpartisan Center on Budget and Policy Priorities, the time limit will be in effect in more than 40 states, including 22 of which have not had such a rule since before the recession. The center estimates the change will impact between 500,000 and 1 million people, as different states and counties roll out their take on the new requirements.

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This gradual rollout will make it difficult to gauge exactly how much of an impact the change will have on retailers, said Craig Johnson, president of Customer Growth Partners. However, he estimates it will weigh some 0.4 to 0.6 percent on Wal-Mart's comparable sales.

"It's not insignificant," Johnson said. "People are very stretched financially ... this is yet another pressure factor."

A spokesman for Wal-Mart did not immediately respond to a request for comment.

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Indeed, changes to food stamp qualifications are far from the only thing weighing on low-income consumers. Although unemployment is down, Johnson said the median income for the overall population has been flat or down 2 percent over the past 10 years, with the biggest drop occurring among the lowest two income quintiles.

What's more, gas prices are currently at an average $2.06 a gallon across the U.S., according to AAA. While that is still some 34 cents less than one year ago, it also represents an increase of roughly a quarter per gallon over the past month.

"This is broader than just SNAP," Johnson said.

To be sure, Johnson said the latest change to SNAP qualifications will have a much smaller impact than when a separate benefit increase ended in late 2013. According to the Center on Budget and Policy Priorities, that reduced the benefits of "nearly every SNAP recipient" — roughly 47 million people — who on average saw their benefit cut by 7 percent. During the first quarter of 2014, Wal-Mart said these changes trimmed its grocery sales by 0.9 percent.

During its latest earnings announcement, Wal-Mart reported a 1.4 percent quarterly decline in revenue and lowered its forecast for sales during the current fiscal year to a reading of flat. The retailer said that if it weren't for recent store closures and a stronger U.S. dollar, it would have maintained its forecast for annual sales growth in the 3 to 4 percent range.