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What the food stamp cut will mean to retailers

November 4, 2013

On Friday, one in five American households had to face the reality of a decrease in government assistance. The Supplemental Nutrition Assistance Program, or SNAP, saw an end to a temporary increase in funding from 2009. For the average family of four receiving assistance, that means a decrease of $36 a month.

That money would likely have gone to retailers that cater to low-income families, analyst Andrew P. Wolf told the Los Angeles Times.

Retailers most likely to be negatively affected would be Walmart,a specifically, and grocery and dollar stores in general.

"We're a little concerned about the food stamp cut," Dennis Eidson, chief executive of Spartan Stores Inc., a Michigan supermarket chain, said in a conference call with analysts last week. "That could be a meaningful event for us."

Other chains downplayed the effect, saying customers will use their own money to buy groceries.

William S. Simon, chief executive of Walmart U.S., told investors that his company could benefit if cash-strapped consumers look for bargains. Walmart estimates that it gets about 18 percent of all food stamp spending.

"Everybody's benefit is going to get cut, price will become more important," Simon said. "And when price is more important, we're more relevant."

Read more about consumer behavior.