Food Stamp Cuts Threaten Wal-Mart

foodThe recent cuts in food stamps last November is threatening Wal-Mart’s business. The retailer’s quarterly earnings are expected to be at or below their predictions, from $1.60 to $1.70 per share. They project their total earnings to be $5.16 per share.

Twenty percent of Wal-Mart’s customers are food stamp recipients, thus affecting the retail store’s earnings. With 47 million Americans struggling to put food on the table, this will affect Wal-Mart in ways they probably have never expected. The company has always marketed to lower income people by attracting them to the store with their competitive prices.

Not only is Wal-Mart dealing with the aftereffects of the food stamp cuts but they are also facing tough competition from Amazon, dollar stores and other smaller chains. Family Dollar, a popular store for penny pinching Americans, has been suffering from lower earnings also. In addition, winter storms across the United States have closed many stores.

The recent layoffs of 2,300 employees from its Sam’s Club stores will have an effect on Wal-Mart’s bottom dollar. This is the largest layoff from the company since 2010, when they laid off 10,000 workers. The recent layoff accounts for two percent of Sam’s Club’s workforce, and some stores will be closing in Brazil and China. Wal-Mart is not alone in suffering a loss in quarterly earnings. With its 11,086 stores, it is still one of the strongest retailers out there. While it is restructuring its store model and reorganizing its workforce, other retailers have closed, such as J.C. Penney, and Macy’s has drastically cut back its workforce and closed some stores but a company closure could be imminent.

Wal-Mart will be further affected if the latest farm bill measure passes Congress, which would leave 850,000 food stamp recipients with $90 less per month to feed their families. This would amount to a total of $9 billion in food stamp cuts over 10 years. If the farm bill measure passes, families who receive more than $20 in heating assistance will not be affected. 300,000 of the families that would suffer from further food stamp cuts live in New York. This would threaten Wal-Mart’s profits if food stamps are further cut.

Food stamps in America

Food stamps have done much to improve the lives of poor Americans. Research has shown that when families are able to obtain government assistance, fewer children went hungry and fewer had developmental delays as a result of poor nutrition. Babies whose mothers received food stamps were usually born normal weight.

When the recession started in 2008, food stamp applications increased by 15 percent. The average amount a person gets in food stamps is $134 a month.

Although the poverty rate hasn’t shifted, politicians want to make it more difficult to meet qualifications to receive food stamps. Studies have shown that when Americans receive help such as school lunch and housing subsidies, food stamps and refundable tax credits, people find it easier to get out of poverty.

There are various myths about food stamps, such as people equating them with “welfare” and recipients being able-bodied but too lazy to work. The fact is, many people who get food stamps are working. And many who receive food stamps are children, the elderly and the disabled.

By Juana Poareo 

Sources:

Reuters 

Huffington Post

USA Today

CNN Money

CNN Money

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