Expected cuts in President Donald Trump’s budget proposal for 2018 in the area of federal entitlement programs might warrant keeping an eye on its impact on discounters, grocers and dollar stores.
That’s according to Gordon Haskett retail analyst Charles Grom.
The cuts — expected to save $1.7 trillion over the next 10 years, if approved as drafted — are expected to include entitlements such as food stamps. The proposed budget is slated to be unveiled on Tuesday.
According to Grom, the budget calls for a $193 billion cut for food stamps over a 10-year period, or $19.3 billion annually. For the average household, that would mean a drop to $173 each month from $252, or a 31.3 percent decline. And while Grom said the probability of its passing in its current form remains low, he said it should still be monitored, “particularly for discounters, grocers and dollar stores — all of which have called out last year’s big reduction as a drag on sales.”
The analyst noted that the proposal would accelerate what was already expected to be a gradual reduction in the program by 2026. He noted that the number of participants receiving food stamps has declined from its peak in late 2012 and early 2013. Grom said it’s a “phenomenon that has certainly weighed on sales trends at a number of retailers over the past couple of years, including Wal-Mart, Target, Dollar General, Family Dollar and conventional grocers [such as Kroger].” The current average monthly receipt is $252, down from $277 when participant levels were at its peak.
According to Grom, Wal-Mart “has been able to buck the trend over the past year — showing comp and traffic acceleration while the dollar stores/grocers have experienced noticeable comp compression” from cuts in the food stamp program, along with food deflation.
While retailers such as Wal-Mart, Target, Dollar General and Family Dollar include grocery items as significant component of their merchandise mix, they also sell apparel, lingerie and shoes in the stores.
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