Food retailers catering to lower income shoppers could face additional sales pressures if expected cuts in food aid in the federal budget to be released Tuesday are realized.
President Trump’s proposed budget is expected to slash $193 billion from the federal government’s Supplemental Nutrition Assistance Program (SNAP) between 2018 and 2028.
Analysts said such a proposal — if enacted — would significantly accelerate what was already expected to be a gradual reduction in the SNAP program from $65.8 billion annually in 2017 to $64.8 billion by 2026, and would likely increase the sales pressure on dollar stores and other small discounters whose customers disproportionately rely on the program. Several of those retailers including Dollar General last year remarked that an ongoing reduction in the program due to planned rollbacks of SNAP expansions enacted during the recession hurt sales last year.
Chuck Grom, an analyst with Gordon Haskett Research Advisors, in a note distributed to clients on Monday said the proposal would reduce the monthly average benefit to recipients by more than 31% to $173 from a current benefit of around $252 per month.
“[T]he probability of it passing in its current form remains low, but should be monitored, particularly for the discounters, grocers, and dollar stores — all of which have called out last year’s big reduction as a drag on sales,” Grom said.
According to the USDA, which administers SNAP, supercenters receive the largest share of SNAP redemptions in the U.S. — 51.7% in 2016, while supermarkets are next with 30% of redemptions.