Waning Food-Stamp Growth May Drag Down Grocers: Chart of the Day

Slowing growth in U.S. food-stamp benefits may weigh on grocery chains and other retailers that serve the program’s recipients, according to Bob Summers, an analyst at Susquehanna Financial Group LLLP.

As the CHART OF THE DAY shows, year-to-year percentage gains in benefit payments narrowed in August through October, the latest month for which the U.S. Department of Agriculture has published data.

October’s 1.7 percent increase was the second-smallest since 2006 for food stamps, formally known as the Supplemental Nutrition Assistance Program, or SNAP. The smallest, 1 percent, occurred in May. The rate plunged from a peak of 63 percent in August 2009, two months after a recession ended.

“Program growth will remain under pressure” as Congress considers possible cuts to SNAP later this year, Summers wrote yesterday in a report. The current food-stamp aid was extended through Sept. 30 as part of a federal budget deal reached last week. The program accounts for about half of the USDA’s budget.

Retailers who have benefited from SNAP’s growth “have begun to experience challenges,” the New York-based analyst wrote. Kroger Co. (KR) and Safeway Inc. (SWY), the country’s two largest grocery-store chains, have negative ratings at Susquehanna. The calls show Summers expects the companies’ shares to decline at least 15 percent in the next 12 months.

Dollar stores may be at risk along with supermarkets. Family Dollar Stores Inc. (FDO), the U.S. industry’s second-largest chain, said last week that food and other so-called consumables were the fastest-growing segment of its business last quarter. Sales in this category rose 18.5 percent from a year earlier.

To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

To contact the editor responsible for this story: Chris Nagi at chrisnagi@bloomberg.net

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