The coming end of emergency food-stamp allotments is not only bad news for beneficiaries, but it could also lead to a drop in business at retailers ranging from Walmart and Kroger to dollar stores.
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Emergency allotments for food stamps — formally known as Supplemental Nutrition Assistance Program (SNAP) benefits — are due to end nationwide beginning on March 1, 2023. The allotments were originally approved during the COVID-19 pandemic and boosted the typical SNAP payment by $95 a month.
The allotment was granted to help SNAP recipients weather the financial hardships caused by the pandemic. Many were also given a 15% increase that boosted the average monthly benefit per person to more than $240. But that figure was expected to drop below $170 per person when the emergency allotment ended. Many states have already ended the emergency payments.
Because SNAP provides food-purchasing assistance to low-income US households, many beneficiaries shop at discount stores to make their money stretch further. Food stamps account for more than 10% of overall dollar-store revenues and can contribute more than one-fifth of overall supermarket sales in lower-income areas, Fox Business reported, citing comments from Howard Jackson, president of HSA Consulting.
As GOBankingRates previously reported, research conducted by IRI found that prior to the pandemic, SNAP recipients accounted for roughly 12% of all food and beverage sales online and in stores at major chains. During the first year of the pandemic, SNAP shoppers drove 19% of dollar growth for food and beverage retailers — mainly because of the emergency allotments.
With SNAP recipients losing the extra money they got during the pandemic, grocery sales at many retailers are likely to take a hit. In fact, this has already happened. During the fiscal quarter ended in August 2022, supermarkets in 8 states that already ended emergency allotments underperformed those in the 38 states that still paid the allotments, according to a report from BMO Capital Markets.
Once you factor in 2023 cost-of-living increases for SNAP benefits, Goldman Sachs analysts expect overall SNAP benefits to decline 7% this year compared to last year. That will end at least three consecutive years of growth, Fox Business noted.
Of the companies that Goldman Sachs analyzed, bargain retailer Grocery Outlet had the highest exposure to SNAP, at about 15% of total sales in 2021. Others with high exposure include Walmart, Dollar General, Family Dollar, Kroger and BJ’s Wholesale Club. Each of those chains gets nearly 10% of revenue from food stamps.
Some of the lost SNAP revenue will be recovered through sales to higher-income consumers who have gravitated to discount stores to offset high inflation. Another positive trend is the low unemployment rate, which should make it easier for low-income individuals to find work and boost their earnings.
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Even so, some retail experts expect discount chains to suffer from lower SNAP-related sales because they operate with such thin margins.
“It is difficult in this very low margin business to develop capital and sustain a business without outside support,” Stephanie Johnson, vice president of government relations for the National Grocer’s Association (NGA), said in a letter to Congress.
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This article originally appeared on GOBankingRates.com: Food Stamps: How Ending Enhanced SNAP Benefits Could Hurt Walmart, Dollar Stores