Cutting Food Stamp Payments to the Poor Hurts the Rich

  • Share
  • Read Later
Getty Images

Like most retailers, Walmart blamed the awful weather during the vital Christmas shopping season for its mediocre results in the quarter ending January 31. The company reported quarterly sales of $128.8 billion, up a tepid 1.4% and earnings of $4.4 billion, down 21%. And sales in U.S. stores opened for at least a year, a key growth measure, dropped 0.4%. According to Walmart treasurer Claire Babineaux-Fontenot, 200 stores were closed at some point because of harsh weather.

Walmart also noted that it is a victim of government spending cuts: last November participants in the federal Supplement Nutrition Assistance Program (SNAP) had their monthly allotments cut by a few dollars. SNAP benefits had increased following passage of the Recovery Act in 2009, but that funding ran out in November and wasn’t renewed.  SNAP households are Walmart customers, meaning that if they had less to spend on groceries, they were going to buy fewer of them, which turned the quarter into a downer for Walmart in the U.S. “In the absence of a reduction of government SNAP benefits, which represented approximately 40 basis points of impact to comp sales, we believe the quarter would have been flat,” the company said. Walmart also reported that grocery sales dropped in the low single-digits, citing the SNAP benefit reductions.

The company didn’t specify how much sales were lost from the SNAP reductions, although it certainly knows the answer.  But based on Walmart stores’ U.S. sales of $74.64 billion in the fourth quarter of last year, it seems that the chain lost out on about $300 million of sales tied to the food stamp program.

While that’s not much more than a rounding error on a company with $473 billion in global revenues, the drop in sales, combined with the company’s announcement that is was closing stores in once-hot markets in China and Brazil, sent Walmart’s share price down more than 2% over the next two days. The lower share price knocked some $17 billion off Walmart’s market cap, currently around $238 billion. That in turn cost money for investors–some of them Walmart shoppers– in popular mutual funds such as Vanguard Total Stock Market Index Fund or the Dodge & Cox Stock fund, among the large holders of Walmart stock.

When you look a bit further, the ironies escalate. Some of Walmart’s own employees are beneficiaries of food stamp programs because of their low wages—a point of contention among the company’s critics. So they could potentially suffer a double whammy here, since lower sales usually translates to fewer labor hours available. Meaning they could lose both wages and SNAP benefits. Then again, the lack of work hours may mean employees not currently eligible could now qualify for SNAP benefits, raising the cost to the government.

Which is to say, no matter where you reside on the political or economic spectrum a change in a transfer payment program such as SNAP is not as simple as a budget cut.

2 comments
Elsa
Elsa

the difference between the rich and the poor is getting bigger every day but please don't tell me stuff like this. The rich do NOT see the problems the poor have every day. The rich DO NOT WANT to KNOW about the problems of the poor. It has never changed. And.... the middle class is or rather has become poor too. They were in the middle and are now at the bottom.

This is thanks to the mentality of the higher classes, which are in politics....

darkcrazy
darkcrazy

If there are any traders out there trading the Forex I wanted to warn you don't waste your time I've been trying to make money with it for years! Go to the website Bionic Traders and get into trading the futures instead it's much better now I'm making money trading and very happy.