Living on food stamps is a hard-knock life for Wal-Mart

Walmart Financial Services

Wal-Mart Stores Inc. is the world’s largest company with about $476 billion in annual revenues and a market value of nearly $250 billion, but it lives to a large extent on food stamps.

The retailer blamed the weather for its weaker-than-expected sales, but it can also blame a weakening economy as well as cuts in Food Stamps, or the Supplemental Nutrition Assistance Plan.

Wal-Mart had warned of lower sales earlier this year as a bipartisan Farm Bill wound its way through Congress. President Obama signed it into law on Feb. 7 and it will cut $8 billion from the Supplemental Nutrition Assistance Program over the next 10 years. It could have been worse for those who rely on the program. Republicans wanted to decrease funding by $40 billion.

Analysts who follow Wal-Mart’s stock estimate that 20% of its customers make their purchases using food stamps, so a cut in this public assistance program is ultimately a cut for Wal-Mart.

Among the “risk factors” Wal-Mart has listed in it’s financial reports are “changes in the amount of payments made under the Supplement Nutrition Assistance Plan and other public assistance plans” as well as “changes in the eligibility requirements of public assistance plans.”

More than 47 million Americans rely on food stamps, according to the U.S. Department of Agriculture, which administrates the program. They’re not actually stamps anymore but plastic debit cards.

Wal-Mart has made no secret of its reliance on the program. It is virtually a welfare case, itself.

Bill Simon, who is CEO of Wal-Mart’s U.S. business, was even more telling during a Goldman Sachs conference in 2010.

“The Wal-Mart customer is a bit of a microcosm of the U.S. economy,” he said. “Our customers are focused on their savings, and they need us now more than they ever have. Unemployment, we all know, remains [high] doesn’t appear to be going anywhere quickly. Gas prices are high….”

“It is our responsibility to figure out how to sell in that environment,” Mr. Simon said. “And to figure out how to deal with…an ever-increasing amount of transactions being paid for with government assistance.”

“You need not go further than one of our stores on midnight at the end of the month,” Mr. Simon went on.

“It’s real interesting to watch. About 11 p.m., customers start to come in and shop, fill their grocery basket with basic items, baby formula, milk, bread, eggs, and continue to shop and mill about the store until midnight, when…government electronic benefits cards get activated and then the checkout starts.

“The only reason somebody gets out in the middle of the night and buys baby formula is that they need it,” Mr. Simon said. “We are open 24 hours…. If you are there at midnight, you are there for a reason.”

The reason millions of Americans rely on food stamps is a lack of jobs following the 2008 financial crisis. While unemployment has fallen from more than 10% to 6.3%, it has fallen to a large extent because many Americans have grown discouraged and stopped looking for jobs.

Many of them rely on food stamps and the world’s largest company in turn relies upon them. It is an example of how free-market capitalism isn’t all that it seems and how the public assistance model can be exploited for corporate profits.

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