businessinsider | Discount chains like Dollar General and Big Lots are warning that cuts to food stamps and lower-than-usual tax refunds this year could start hurting sales.
This month, 32 states ended the federal increase to food stamps, known as SNAP benefits, that began during the early weeks of the pandemic. At the same time, certain beefed-up tax credits are no longer available, which means many taxpayers are preparing for smaller tax refunds this year.
Both changes are the result of a wind-down of pandemic-era policies, and it's the combination of factors that has retailers worried — they're coming at a time when inflation has kept prices for everyday goods unusually high, straining the budgets of lower-income consumers in particular.
Now, the retailers that serve those consumers are preparing for a possible slowdown in spending.
"In particular, we remain concerned about the lower-income customer, our core customer," Michael O'Sullivan, CEO of off-price department store Burlington, said during a call with investors this month. "In 2022, this customer group bore the brunt of the impact of inflation on real household incomes. We think the impact of inflation will moderate this year, but there are other factors that could hurt this customer, such as a rise in unemployment and the ending of expanded SNAP benefits."
At value chain Big Lots, where nearly 80% of shoppers have a household income under $100,000, "customers are pinched," CEO Bruce Thorn said during a recent investor call.
"At this point, 30% of that lower household income customer, their expenses today are greater than their income coming in. And 70% of them have curbed spending as a result of that," he said.
Thorn estimated that the tax refunds, though arriving earlier this year, are about 10% to 15% lower than last year, and when combined with the reduced SNAP benefits, it "further deteriorates lower household income spend." Those shoppers, he said, are "going through a tough time right now."
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