Food-aid cut hurts, Wal-Mart tells SEC

As Wal-Mart strives to maintain its spot as the world’s largest retailer, the company and its shareholders have lots to be anxious about - from growing competition from other retailers and the wrath of Mother Nature to legal and regulatory action and economic strains here and abroad, according to a company report.

Added to a long list of uncontrollable circumstances are changes and anticipated modifications to public government benefits, specifically last year’s reduction in the Supplemental Nutrition Assistance Program, more commonly known as food stamps.

The Nov. 1 change in the government’s food-stamp benefits is an ongoing threat to the retailer’s target customers - low-income shoppers living on a fixed budget, Wal-Mart said recently in its 10-K year-end report filed with the Securities and Exchange Commission. The company said changes to the food-stamp program contributed to lower-than anticipated sales in its fourth quarter of fiscal 2014, which ended Jan. 31.

And from the looks of things, the threat will continue for the rest of the current fiscal year, said Brian Yarbrough, CFA senior analyst with Edward Jones in St. Louis.

“I think it’ll hurt [Wal-Mart] for the next year, until they cycle over it,” Yarbrough said. The difference in sales will likely be felt until the fourth quarter of fiscal 2015, when the reduction in food-stamp benefits will have been enacted for a year.

“I don’t think it’ll hurt them to the magnitude that it has, but it will definitely be a headwind up until November of this year,” he said.

Jack Sinclair, executive vice president of the food business for Wal-Mart U.S., said in December the retailer knew well the financial pressure the food stamp change would have on customers who count on the benefits.

“Our customers always rely on us to be a price leader, and we take that responsibility seriously,” Sinclair said. “We remain focused on offering low prices to our customers every day so that they can stretch their food budgets even further.”

The SEC 10-K form requires publicly traded companies to name all factors that could harm the company’s future profitability.

Randy S. Koontz, first vice president of investments for Pinnacle Wealth Management of Raymond James & Associates Inc. in Rogers, said Wal-Mart tracks to the penny where its sales come from and feels the effects of food-stamp cuts at the time of the month when benefits run out. “They see a spike in business around midnight on the day of the month when those benefits are loaded onto those [electronic benefits transfer] cards,” Koontz said.

The same goes for a baby food supplier Koontz knows. “They see their sales drop toward the end of the month because they know those people have run their cards to zero,” he said.