Food stamp cuts could be a blow to discounters

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Food stamp cuts could be a blow to discounters

05/22/2017

Trump's blueprint for the 2018 budget year includes a wave of cuts to benefit programs such as Medicaid, federal employee pensions, welfare benefits and farm subsidies. Cuts include $193 billion from SNAP over the coming decade — a cut of more than 25 percent — implemented by cutting back eligibility and imposing additional work requirements, according to the Associated Press. The program presently serves about 42 million people. The food stamp cuts are several times larger than those attempted by House Republicans a few years back and comprise the bulk of a 10-year, $274 billion proposal that's labeled as welfare reform. The fleshed-out proposal follows up on a partial release in March that targeted the budgets of domestic agencies and foreign aid for cuts averaging 10 percent.

"Discounters, grocers and dollar stores all called out last year’s big reduction as a drag on sales," said Gordon Haskett analyst Chuck Grom. 

Indeed, after peaking in late 2012/early 2013, the total number of SNAP participants has declined significantly – a phenomenon that has certainly weighed on sales trends at a number of retailers over the past couple of years, including Walmart, Target, Dollar General, Family Dollar, and conventional grocers (Kroger). Along those lines, according to the USDA, the total number of SNAP participants in December 2016 stood at 42.9 million – down 10.2% from the peak while the average monthly household receipt came in at $252 (from $277; a decline of 9.1%). This has resulted in a considerable headwind for many, including Walmart, given that from 2014-2016 approximately 49.1% of SNAP redemptions occurred at Super Centers.

"Favorably, Walmart has been able to buck the trend over the past year – showing comp and traffic acceleration while the dollar stores/grocers have experienced noticeable comp compression from the SNAP cuts along with food deflation," Grom said.