Walmart’s annual report, filed with the Securities and Exchange Commission this week, has revealed how much the world’s largest retailer relies on food stamps for its profit. In the report, the retailer says that they foresee numerous risks for the coming year, including the payments made under the Supplemental Nutrition Assistance Plan.
Walmart is known to be controversial for encouraging their employees to file for government benefits, like food stamps, to complement their low wages; however, it is the first time that Walmart shows just how much it relies on government benefits.
In the report for the fiscal year, which ended on January 31, Walmart included a statement, expressing its concerns. “The business is subject to several factors, risks and uncertainties. These are out of our control. Some of the risks may be the changes under the Supplemental Nutrition Assistance Plan as well as changes in its eligibility requirements,” the report says.
The fourth quarter of 2013 was a bad one for Walmart, as earnings reached as low as $4.43 billion, a 21 percent decrease compared to one year earlier. According to the major retailer, this was partly caused by the winter weather; however, now that Walmart said it relies on food stamps for its profit, 2014 might be a difficult year.
Chief Financial Officer Charles Holley says, “We did not expect to be largely affected by the changes in benefit programs from the government, but it does pose a serious concern, especially the changes in the Supplemental Nutrition Assistance Plan that went into effect on November 1.” The cuts has led households to have a reduction up to $460 per year and since Walmart caters to low-income Americans, profits for 2014 are expected to be affected, unless Congress reinstates the extension of the program.
In the meantime, Walmart is implementing new tools, sales and retail formats to step up and compete with every retailer under the sun. Last Wednesday, it opened its first Kwik-E-Mart, a pilot convenience store that has the size of a 7-Eleven, featuring a gas station. It also sells snacks, drinks, deli sandwiches and pizza, as well as basic staples like milk and eggs. Additionally, Walmart allows customers to exchange their video games for gift cards as of this week, with a maximum worth of $35. Other retail formats that Walmart is working on are dollar stores and home improvement, to compete with Home Depot and Lowe’s.
With its new approach, Walmart offers customers different store formats to choose from, varying from the Supercenters to smaller convenience stores. The world’s largest retailer currently has six types of stores to offer customers; however, they are contemplating a 2,500 square feet store on a university campus, as well as a drive-through pick-up option, where customers can place their order online and pick up their purchase on the same day.
Walmart may say it relies on food stamps for its profit, but the retailer is doing everything it can to move away from its dependency and also its image. According to Walmart U.S. President Bill Simon, the retailer still holds a 25 percent share in the $585 billion business of supermarkets.
By Diana Herst