2017 has not been kind to retailers, and if one of the Trump administration's budget cuts takes hold, there will be more pain to come.
The current Trump administration budget calls for a $191 billion cut to the Supplemental Nutrition Assistance Program — commonly referred to as food stamps — between 2018 and 2028.
The Congressional Budget Office said the average food stamp benefit is $252 per month, the lowest level in five years as several rounds of cuts began in 2013. If the Trump administration's SNAP budget proposal passes, the monthly amount will fall by 31 percent to an average $173 a month.
CNBC has exclusive estimates to quantify just which retailers will take the biggest hit if food stamp benefits are cut.
Retail consultancy AlixPartners estimated retail collectively stands to lose $70.7 billion over the decade if the proposed cuts take place.
"For about every dollar of benefit reduction or spending, there's about a 37-cent loss in grocery sales," said Ted Stenger, managing director at AlixPartners.
According to the U.S. Department of Agriculture, the government agency that runs the food stamp program, supermarkets and superstores received 81 percent of the SNAP benefits in 2016, even though that subsector only represents 14 percent of the total companies authorized to accept food stamps.
But that means the group is poised to be the hardest hit. AlixPartners estimated the size of the impact would be about $57.5 billion at supermarkets and superstores over the next 10 years if the budget item passes as proposed.
No one retailer redeems more food stamp benefits than Wal-Mart. The discount retailer makes up the largest share of superstore redemptions. In 2013, Wal-Mart disclosed it gets an estimated 18 percent, but it hasn't given any updated figures. Using that information as a part of its equation, the retail consultancy estimates Walmart would take a $12.7 billion hit to U.S. sales over the next decade.
Target sees the second-largest food stamp redemption in the superstore and supercenter category, with an estimated $4.8 billion to $5.3 billion sales drag.
"Target is committed to supporting the communities we serve by accepting SNAP benefits that provide nutritional assistance to those in need. We are watching the budget process and proposals around SNAP funding, knowing it could have an effect on our guests and their families," Target said in a statement. "Overall, we anticipate the impact of this proposal on Target's business to be small and significantly lower than industry reports. We'll continue to monitor the budget process closely moving forward."
Low-priced grocery store chain Aldi would see the third-largest impact, estimated to fall between $4.4 billion and $4.9 billion.
Kroger comes in fourth, with an estimated $3.6 billion to $3.9 billion sales hit from proposed SNAP reductions.
Stenger said the economic demographics in the areas around retail stores that accept SNAP factor into the estimates, along with the stores that actually accept the food stamp payment cards (commonly referred to as EBT or electronic benefit transfer).
About half of Kroger's stores are not enrolled in the program. "That's probably because those stores have a very low content of customers who are using the card," Stenger said.
In response to the AlixPartners estimates, Kroger spokeswoman Kristal Howard said, "The SNAP program was never intended to fully replace families' grocery bills, but to supplement it. SNAP and WIC [the Special Supplemental Nutrition for Women, Infants, and Children] customers in our stores spend some of their own cash on food. When program spending has been reduced in the past, customers shift to spending more of their cash on food and less cash on other things. We look forward to the legislative process."
Kmart has been facing years of hardships when it comes to sales and traffic, as more than 150 of its stores have closed or are closing this year. The proposed food stamp benefit cuts could mean a sales loss of $1.9 billion to $2.2 billion, according to AlixPartners.
But the potential reduction in the government's SNAP program will likely have ripple effects beyond those retailers that sell food and drinks, it's just harder to pinpoint and quantify.
"If you look at food spending as a whole, it's not discretionary, it's necessary. So, you reallocate budget dollars to spend on food if you have to," explains Diana Sheehan, Kantar Retail grocery analyst and director of retail insights.
The SNAP program benefits swelled during the Great Recession as the economy faltered and the unemployment rate surged. The Obama administration began instituting cuts to the program once the economy was in recovery, which began in 2013.
But Sheehan pointed out that for the last several years the reduction in benefits has been coupled with deflationary trends in food prices and lower gas prices.
"So while those receiving the food stamp benefits were getting less, food costs and gas prices to get to the store were lower too," she said. But some expect both those trends could be abating, which could mean the proposed deeper cuts will be more painful to those consumers, Sheehan said.
Doug Hermanson, senior economist at Kantar Retail, said its ShopperScape index showed these consumers "tend to cut back on small indulgences like eating at restaurants, followed by using more coupons, and buying more private label products."
The impact takes some time for retailers to manage through, he said. "We do see households cut back on everyday expenses when they face these challenges, especially in the short term. It takes a couple quarters for all of these behaviors to have impacts on retailers."
Hermanson also noted there can be some benefits too as shoppers switch from one retailer to another to find bigger discounts. "In some cases, these shoppers trade into a Walmart or discounter by shopping a supermarket less," he said.
In perspective, when amortizing the estimated sales impact over 10 years, based on the retailers' most recent full-year sales, the sales impact looks less intense.
For example, the estimated $12.7 billion sales impact to Wal-Mart is over 10 years. Wal-Mart's most recent full-year sales hit $485.9 billion, so $12.7 billion over 10 years is $1.27 billion a year, or 0.26 percent of sales, based on its most recent fiscal year.
Kmart would see the largest percentage hit based on its most recent full-year sales report;665trqgwzy+ the high-end of the impact range could represent 2.5 percent of annual sales.
Wal-Mart, Target, Kmart and Aldi have declined to comment on the AlixPartners estimates.