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Wal-Mart: Food Stamps Spending by Customers Key to Its Profits

Image: Wal-Mart: Food Stamps Spending by Customers Key to Its Profits

Tuesday, 25 Mar 2014 08:47 AM

By Clyde Hughes

For the first time, Wal-Mart Stores Inc. is citing its dependence on customers using food stamps in order to maintain its revenues and profits.

Wal-Mart's annual report to the Securities and Exchange Commission included a required cautionary statement which informs the public of factors that could harm future profitability, according to The International Business Times on Tuesday. Wal-Mart's statement included usual warnings such as as natural disaster, civil unrest, changes to income and corporate tax rates, and ongoing investigations against the company, but said the public assistance inclusion was new.

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"Our business operations are subject to numerous risks, factors and uncertainties, domestically and internationally, which are outside our control," the Wal-Mart statement said. "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, ..."

"In other words, Wal-Mart for the first time in its annual reports acknowledges that taxpayer-funded social assistance programs are a significant factor in its revenue and profits," wrote Angelo Young of the International Business Times. "This makes sense, considering that Wal-Mart caters to low-income consumers. But what's news here is that the company now considers the level of social entitlements given to low-income working and unemployed Americans important enough to underscore it in its cautionary statement."

Wal-Mart has blamed the brutally harsh winter and food stamp cuts for a decline in late season sales, according to the Wall Street Journal's Market Watch blog in January. The weather was a theme for negative sales reports for other outlets as well, reported Market Watch.

"In all, retailers have reported more than 35 pre-announcements and earnings misses, according to research from Susquehanna Financial Group," wrote Steve Goldstein of Market Watch in January. "The Susquehanna report said Kroger, Supervalu and Safeway could also be hit by food-stamp cuts. Some of those supermarkets saw bigger losses on the day than the roughly one percent decline seen for Wal-Mart. The world's largest retailer has lost more than six percent year-to-date."

Market Watch reported that American worker incomes were stagnant in December because of a slowdown in hiring, so they took from their savings to pay for holiday purchases. The savings rate dropped to 3.9 percent from 4.3 percent, noted Market Watch.

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