Wal-Mart Admits Cuts to Public Assistance Programs Is a Risk Factor
Wal-Mart Stores Inc. (NYSE:WMT) said in its 10-K filing this year that cuts in government funding for food stamps could pose a potential threat to its business, according to a MarketWatch report published Monday.
“Our business operations are subject to numerous risks, factors and uncertainties, domestically and internationally, which are outside of our control. … These factors include … changes in the amount of payments made under the Supplement[al] Nutrition Assistance Plan and other public assistance plans, changes in the eligibility requirements of public assistance plans,” Wal-Mart’s filing reads. SNAP stands for “Supplemental Nutrition Assistance Program” — yes, Wal-Mart’s lawyers got the name wrong.
This is the first time that Wal-Mart has acknowledged the extent to which it depends on customers who are receiving SNAP program benefits.
Wal-Mart, a superstore that prides itself on having lower prices than most grocery stores, has always drawn customers from a lower-income bracket, but its interesting that this is the first time the company has mentioned public assistance programs or their effect on the company’s business in a report — especially considering that the company has come under fire numerous times for not only paying its employees poorly but also recommending that those employees seek government assistance.
Though the company has never put its dependence on public assistance programs in writing, this isn’t the first time Wal-Mart has commented on the effects of cuts to those programs on its earnings. In January, Wal-Mart said in an earnings report that the reduction in food stamp benefits by about 5.5 percent in November hurt its profits in the last quarter (the company posted earnings 21 percent lower than the previous year), and cited the cuts as the main reason why its comparable-store sales figures were negative.
Wal-Mart CFO Charles Horley said the company hadn’t anticipated just how much of an impact the end of such programs would have on the business.
The International Business Times notes that enrollment in SNAP benefits rose by 70 percent between 2007, the year before the subprime lending crisis that lead to the greatest recession in U.S. history since the Great Depression, and 2011, when enrollments in the program finally began to level off.