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Millions of Americans may soon have a harder time affording groceries. That could drive more spending at stores like Walmart.
A new policy tied to President Donald Trump’s tax law began taking effect on Monday. It will change how Supplemental Nutrition Assistance Program benefits — which nearly 42 million Americans rely on to afford food — are administered to low-income Americans.
The most significant policy change will require nondisabled adults without dependents to fulfill work requirements until they reach age 64 to qualify for aid, up from the current cutoff age of 54. The Congressional Budget Office estimates that over 2 million Americans could lose SNAP coverage due to this change.
Major retailers like Walmart, Target, and Kroger collectively receive billions in SNAP spending each year. Benefit cuts could mean less spending from budget-conscious shoppers.
But perhaps counterintuitively, analysts say the changes could ultimately benefit some large retailers.
Michael Baker, an analyst at D.A. Davidson, told CNBC that reduced SNAP benefits may push lower-income consumers to shop more often at discount grocers like Walmart. He said this could boost the company’s sales — even if individual shoppers spend less per trip.
“Consumers have to find other ways to save money — they still need groceries,” Baker said. “I can envision a slight drop in purchase size, but that tends to get offset by increased traffic.”
Scott Moses, head of grocery investment banking at Solomon Partners, also named Walmart as a likely beneficiary of the SNAP changes, in part because it’s well-positioned to offer low prices to consumers in particular need.
“As the world’s largest grocer — by a wide margin — Walmart can use its scale and low cost of debt to capitalize on SNAP cuts,” Moses told CNBC. “It’s done so with food inflation, offering prices smaller peers can’t match while strengthening its value proposition.”
SNAP recipients already gravitate toward stores that market themselves as affordable, according to consumer data company Numerator. Walmart captures about 24% of what consumers spend through SNAP, survey data released in May found.
Over the last five years, shoppers using SNAP have shifted their spending toward Walmart and Costco, according to the data — a move Numerator said was because both retailers are “large-format retailers with strong value and assortment.”
In the coming months, Walmart’s ability to hold down prices could be challenged by the Trump administration’s trade policies. On its August earnings call, the company said more of its imported merchandise was being affected by tariffs.
“We’ve continued to see our cost increase each week, which we expect will continue into the third and fourth quarters,” CEO Doug McMillon said on the call.
Walmart has previously warned that tariffs could lead to higher prices for shoppers. But during the call, CFO John David Rainey said any price increases so far have been gradual.
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