While SNAP subsidy cuts will impact its bottom line, Walmart expects much of the revenue loss to return through other tender types.
Among the investor concerns Walmart CFO and Executive Vice President John David Rainey addressed during the retailer’s 2023 Investment Community Meeting Q&A were possible headwinds caused by the nationwide end of increases to the Supplemental Nutrition Assistance Program (SNAP) approved by Congress during the pandemic. This will decrease the average monthly benefit per SNAP recipient by $90 per month. Student loan repayments are set to be reinstated at the same time, potentially doubling the possible economic stress for many consumers.
Calling the cuts a “net negative” for Walmart, Rainey continued, “But I think it’s important to note that a lot of that is recaptured through under other tender types. Offsetting that somewhat is you’ve got an increase in Social Security benefits with cost-of-living adjustment, which is a benefit to us … I think net through the quarter is actually down year over year.”
This acknowledgement confirms earlier PYMNTS findings speculating on potential Walmart revenue loss through the grocery sector’s 11% share of payments made via EBT cards. Potential losses specific to Walmart may be found in proprietary data created in preparation for PYMNTS’ January “Consumer Inflation Sentiment” report.
Far and away, Walmart earns the bulk of consumers’ last grocery purchases. In fact, if the second through seventh-place grocers were all combined into a hypothetical megagrocer, Walmart would still come out on top. Why? Data published from the same report gives some insight.
As illustrated in the below chart, the main drivers behind consumers’ choice in grocery merchants are convenience along with price and discounts. Walmart has lately been making inroads in delivering enhanced shopper convenience, as Sam’s Club joins the ranks of grocers providing prepared food some consumers are opting for in lieu of restaurant-made meals. The gamble has so far paid off for Walmart, as its prepared food sales have risen.
The shifts to SNAP will not impact Walmart’s convenience plays but likely will impact sales figures from a customer base who believes higher food prices will continue into next year. With approximately 10% of Walmart’s total sales made via Electronic Benefits Transfer (EBT) cards, presumably Rainey is correct in that this SNAP benefits reduction may be affecting Walmart’s bottom line.
This is speculation for now, as there are no officially released numbers forecasting just how significantly the SNAP benefits cut may impact Walmart’s revenue. However, the circumstances surrounding the retail giant’s status as U.S. consumers’ go-to grocer, along with Rainey’s comments, may imply that the true impact may be larger than previously estimated.