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Lucylastic -> Retailers Brace for Reduction in Food Stamps (11/1/2013 3:14:45 AM)
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Retailers and grocers are bracing for another drain on consumer spending when a temporary boost in food-stamp benefits expires Friday.
The change will leave 48 million Americans with an estimated $16 billion less to spend over the next three years and comes just months after the expiration of a payroll tax cut knocked 2% off consumers' monthly paychecks.
On the business side of the equation, the cuts will fall particularly hard on the grocers, discounters, dollar stores and gas stations that depend heavily on low-income shoppers. Weak spending in that stressed consumer segment has already led retailers including Wal-Mart Stores Inc. WMT -0.21% and Target Corp. TGT -1.40% to lower their sales forecasts for the rest of the year ahead of holidays.
"It will certainly have some effect on us and the whole grocery industry," said Jim Hyland, spokesman for Midwestern grocer Roundy's Inc.
Kroger Co. KR -0.12% told investors the Cincinnati-based grocer is bracing for an impact from the benefit cuts. If necessary, the chain is prepared to lower the cost of some foods at the expense of margins to boost sales, Chief Operating Officer Rodney McMullen said on a conference call last month.
Food stamp use started to soften at Kroger's stores in late August and early September, the company said. But it expects consumers to make up for the cuts by using more cash to buy their groceries and is sticking to projections of 3% to 3.5% same-store sales growth this year, Chief Executive David Dillon said.
Enrollment in food-stamp benefits surged during the recession and in its wake, increasing by 70% from 2007 to 2011 before leveling off. The government's stimulus program increased Supplemental Nutrition Assistance Program, or SNAP, benefits across the board by 13.6% in 2009.
As that temporary increase expires on Friday, benefits for a family of four receiving a maximum allotment will drop by 5.4%, the equivalent of about $36 a month, or $420 a year, according to the U.S. Department of Agriculture.
The $16 billion, three-year toll of the cuts estimated by the Center on Budget and Policy Priorities pales in comparison with the estimated $120 billion, one-year hit caused by the earlier expiration of the payroll tax cut. But for many retailers the two have a cumulative effect.
Wal-Mart estimates it rakes in about 18% of total U.S. outlays on food stamps. That would mean it pulled in $14 billion of the $80 billion the USDA says was appropriated for food stamps in the year ended in September 2012.
The retailer said it remains cautious and has been planning for the cuts, and it even hopes the change will help it gain market share. Having less money to spend could make shoppers more price conscious, which Wal-Mart U.S. Chief Executive Bill Simon said is a potential boon for the giant discounter. Indeed, the Bentonville, Ark., retailer said its market share actually went down when benefits were expanded in 2009.
"Price will become more important," he said at an investor's conference earlier this month. "When price is more important, we're more relevant."
http://online.wsj.com/news/articles/SB10001424052702303843104579168011245171266?mod=djemITP_h
Between screwing their own employees and the hundred of thousands of veterans and their families losing SNAP benefits, the cycle of poverty keeps on turning
YAY
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