Shrinking food stamp benefits for families mean yet another challenge for retailers

A worker carries bananas inside the Walmart SuperCenter in North Bergen, New Jersey.

Eduardo Munoz Alvarez | AP

For some shoppers who already struggle to cover grocery bills, the budget is getting tighter.

This month, pandemic-related emergency funding from the Supplemental Nutrition Assistance Program, formerly known as food stamps, is ending in most states, leaving many low-income families with less to spend on food.

More than 41 million Americans receive funding for food through the federal program. For those households, it will amount to at least $95 less per month to spend on groceries. Yet for many families, the drop will be even steeper since the government assistance scales up to adjust for household size and income.

For grocers like Kroger, big-box players like Walmart and discounters like Dollar General, the drop in SNAP dollars adds to an already long list of worries about the year ahead. It’s likely to pressure a weakening part of retailers’ business: sales of discretionary merchandise, which are crucial categories for retailers, as they tend to drive higher profits.

Major companies, including Best Buy, Macy’s and Target, have shared cautious outlooks for the year, saying shoppers across incomes have become more careful about spending on items such as clothing or consumer electronics as they pay more for necessities such as housing and food.

Food, in particular, has emerged as one of the hardest-hit inflation categories, up 10.2% year-over-year as of February, according to the U.S. Bureau of Labor Statistics.

“You still have to feed the same number of mouths, but you have to make choices,” said Karen Short, a retail analyst for Credit Suisse.

“So what you’re doing is you’re definitely having to cut back on discretionary,” she said.

The stretch has made it impossible for some to afford even basic items. It’s still too early to see the full impact of the reduced SNAP benefits, said North Texas Food Bank CEO Trisha Cunningham, but food pantries in the Dallas-Fort Worth area have started to see more first-time guests. The nonprofit helps stock shelves at pantries that serve 13 counties.

Demand for meals has ballooned, even from pandemic levels, she said. The nonprofit used to provide about 7 million meals per month before the pandemic and now provides between 11 million and 12 millions meals per month.

“We knew these [extra SNAP funds] were going away and they were going to be sunsetted,” she said. “But what we didn’t know is that we were going to have the impact of inflation to deal with on top of this.”

Shifting market share

So far, retail sales in the first two months of the year have proven resilient, even as consumers contend with inflation and follow a stimulus-fueled boom in spending in the early years of the pandemic. On a year-over-year basis, retail spending was up 17.6% in February, according to the Commerce Department.

Some of those higher sales have come from higher prices. The annual inflation rate is at 6% as of February, according to the Labor Department’s tracking of the consumer price index, which measures a broad mix of goods and services. That index has also gotten a lift from restaurant and bar spending, which has bounced back from earlier in the pandemic and begun to compete more with money spent on goods.

Yet retailers themselves have pointed out cracks in consumer health, noting rising credit card balances, more sales of lower-priced private label brands and shoppers’ heightened response to discounts and promotions.

Some retailers mentioned the SNAP funding decrease on earnings calls, too.

Kroger CEO Rodney McMullen called it “a meaningful headwind for the balance of the year.”

“We’re hopeful that everybody will work together to continue or find additional money,” he said on the company’s earnings call with investors earlier this month. “But as you know, because of inflation, there’s a lot of people whose budget is under strain.”

Credit Suisse’s Short said for lower-income families, the food cost squeeze comes on top of climbing expenses for nearly everything else, whether that’s paying the electric bill or filling up the gas tank.

“I don’t think I could tell you what a tailwind is for the consumer,” she said. “There just isn’t a single tailwind in my view.”

Emergency allotments of SNAP benefits previously ended in 18 states, which could preview the effect of the decreased funding nationwide. In a research note for Credit Suisse, Short found an average decline in SNAP spending of 28% across several retailers from the date the additional funding ended.

Some grocers and big-box retailers could feel the impact more than others. According to an analysis by Credit Suisse, Grocery Outlet has the highest exposure to SNAP with an estimated 13% of its 2021 sales coming from the program. That’s followed by BJ’s Wholesale with about 9%, Dollar General at about 9%, Dollar Tree at about 7%, Walmart’s U.S. business with 5.5% and Kroger with about 5%, according to the bank’s estimates, which were based on company filings and government data.

Retailers that draw a higher-income customer base, such as Target and Costco, should feel comparatively less effect, Short said. If nothing else, the dwindling SNAP dollars could shift shoppers from one retailer to another, she said, as major players seek to grab up market share and undercut on prices.

Fewer dollars to go around

Another factor could make for a bumpier start to retailers’ fiscal year, which typically kicks off in late January or early February: Tax refunds are trending smaller this year.

The average refund amount was $2,972, down 11% from an average payment of $3,352 as of the same point in last year’s filing season, according to IRS data as of the week of March 10. That average payout could still change over time, though, as the IRS continues to process millions of Americans’ returns ahead of the mid-April deadline.

Dollar General Chief Financial Officer John Garratt said on an earnings call this month that the discounter is monitoring how its shoppers respond to the winding down of emergency SNAP benefits and lower tax refunds.

He said stores did not see a change in sales patterns when emergency SNAP funds previously ended in some states, but he added that “the customer is in a different place now.”

Tax refunds can act as a cash infusion for retailers, as some people spring for big-ticket items like a pair of brand-name sneakers or a sleek new TV, said Marshal Cohen, chief industry advisor for The NPD Group, a market research company.

This year, though, even if people get their regular refund, they may use it to pay bills or whittle down debt, he said.

One bright spot for retailers could be an 8.7% cost-of-living increase in Social Security payments. Starting in January, recipients received on average $140 more per month.

However, Cohen said, the cash influx might not be enough to offset pressure on younger consumers, particularly those between ages 18 and 24, who have just started jobs and face milestone expenses like signing a lease or buying a car.

“Everything’s costing them so much more for the early, big spends of their consumer career,” he said.

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Top Wall Street analysts pick these five stocks for the long term

A line of shoppers wait to enter BJ’s Wholesale Club market at the Palisades Center shopping mall during the coronavirus outbreak in West Nyack, New York, March 14, 2020.

Mike Segar | Reuters

Concerns about a bank crisis have added to the woes of investors, who were already burdened with stubbornly high inflation and fears of an economic slowdown.

Given the ongoing uncertainty, turning to stock market experts to pick attractive stocks for the long term could be a good decision.

Here are five compelling stocks chosen by Wall Street’s top analysts, according to TipRanks, a platform that ranks analysts based on their track records.

Allegro MicroSystems

Allegro Microsystems (ALGM) develops sensing and power semiconductor solutions for motion control and energy-efficient systems. On Tuesday, the company held its inaugural analyst day to provide insights into its strategy and technology.  

Needham analyst Quinn Bolton noted that at the event, management focused on the rapidly growing opportunities across two “secular megatrends” – electrification (mainly e-mobility) and industrial automation. Allegro expects to flourish in these two key markets and to deliver low-double-digit percentage revenue growth from fiscal 2023 to 2028.

Bolton thinks that his margin estimates for fiscal 2024 and 2025 seem conservative, given Allegro’s new long-term model that targets a gross margin of more than 58% and an operating margin of over 32%. He highlighted that the company’s e-mobility serviceable available market is expected to grow at a 25% compound annual growth rate to $3.9 billion by fiscal 2028.

“ALGM’s portfolio is aligned with the industrial secular growth trends in clean energy and automation,” said Bolton. Allegro expects its clean energy and automation SAM to grow at an 18% CAGR to $3.5 billion by fiscal 2028. (See Allegro Insider Trading Activity on TipRanks)

Impressed by Allegro’s growth prospects, Bolton raised his price target to $50 from $42 and reaffirmed a buy rating. Remarkably, Bolton ranks 2nd out of more than 8,000 analysts followed on TipRanks. His ratings have been profitable 67% of the time, generating a 36.3% average return.


Recent results of several cybersecurity companies, including CrowdStrike (CRWD), have reflected resilient demand. Enterprises are moderating their IT spending due to macro pressures but continue to allocate decent budgets to cybersecurity due to growing cyber attacks.

CrowdStrike’s adjusted earnings per share for the fourth quarter of fiscal 2023 (ended Jan. 31) increased 57%, fueled by revenue growth of 48%. At the end of the fiscal fourth quarter, the company’s annual recurring revenue stood at $2.56 billion, reflecting 48% year-over-year growth.

TD Cowen analyst Shaul Eyal attributed CrowdStrike’s upbeat performance to solid execution and robust demand for the company’s Falcon platform. Eyal added that the company is collaborating with Dell to deliver its Falcon platform to Dell’s customers through various avenues.

“We believe CRWD is positioned to achieve its goals of generating ending ARR of $5B by the end of FY26 and of reaching its target operating model in FY25,” said Eyal. He reiterated a buy rating on CrowdStrike with a price target of $180.

Eyal is ranked No. 14 among more than 8,000 analysts tracked on TipRanks. His ratings have been profitable 66% of the time, with each rating delivering a return of 23.7%, on average. (See CrowdStrike Stock Chart on TipRanks)


Next on our list is enterprise software giant Oracle (ORCL), which delivered mixed results for the third quarter of fiscal 2023 (ended February 28, 2023). The company’s adjusted EPS grew 8% and came ahead of Wall Street’s expectations, while revenue growth of 18% fell short of estimates.

Nonetheless, Oracle is optimistic about the solid potential of its cloud business, which delivered 45% revenue growth in the fiscal third quarter. Further, management stated that Cerner, a healthcare technology company acquired in June 2022, has increased its healthcare contract base by about $5 billion. 

Monness, Crespi, Hardt, & Co. analyst Brian White said Oracle delivered “respectable 3Q:FY23 results in a treacherous environment.” He contends that the company’s cloud business continues to navigate ongoing challenges better than the leading public cloud vendors, who reported notable deceleration in revenue growth.

White cautioned investors that the “darkest days” of the economic downturn are ahead of us. That said, he reiterated a buy rating on Oracle with a price target of $113, saying, “Oracle represents a high-quality, value play with the opportunity to participate in a compelling cloud transformation and gain exposure to digital modernization initiatives in the healthcare industry.”

White holds the 50th position among more than 8,000 analysts on TipRanks. Additionally, 64% of his ratings have been profitable, with an average return of 18%. (See Oracle Blogger Opinions & Sentiment on TipRanks)

BJ’s Wholesale Club   

Warehouse club chain BJ’s Wholesale Club (BJ) continues to perform well even as the macro backdrop is getting tougher and pandemic-induced tailwinds have faded. The company recently held its fourth-quarter earnings call and first-ever investor day.

Baird analyst Peter Benedict, who ranks 129th on TipRanks, noted that the company’s membership base is “stronger than ever.” Membership fee income grew 10% in fiscal 2022 (ended January 28, 2023), driven by a 7% increase in members to 6.8 million, a rise in higher-tier penetration and solid renewal rates. It’s worth noting that BJ’s hit its all-time-high tenured renewal rate of 90% for the year.   

“With a structurally advantaged business model, growing/increasingly loyal membership base and emerging unit growth runway, BJ has the fundamental building blocks of a compelling long-duration consumer staple growth story,” explained Benedict. (See BJ’s Wholesale Financial Statements on TipRanks)   

Benedict increased the price target for BJ stock to $90 from $85 and reiterated a buy rating based on multiple strengths, including a solid balance sheet, free cash flow generation and efforts to enhance assortment. His ratings have been profitable 64% of the time, with an average return of 13.4%.


Medical devices giant Stryker (SYK) has built a solid business over the years through strategic acquisitions and continued innovation in its medical and surgical, neurotechnology, and orthopaedics and spine divisions.

BTIG analyst Ryan Zimmerman recently hosted a fireside chat with Spencer Stiles, group president of Stryker Orthopaedics and Spine business and Jason Beach, vice president of investor relations. He highlighted that orthopedics procedure volumes are benefiting from a backlog that is projected to last about four to six quarters, as patients who postponed care previously are returning.

Zimmerman thinks that “SYK retains its growth leadership position in orthopedics even as competitive robotic systems iterate.” He expects Stryker’s new Mako Knee 2.0 software, the Insignia Hip launch and upcoming robotic launches in shoulder and spine in fiscal 2024 could “support a long and robust growth cycle.”

Zimmerman reiterated a buy rating on Stryker with a price target of $281. The analyst ranks 657 out of more than 8,300 analysts on TipRanks, with a success rate of 45%. Each of his ratings has delivered an average return of 8.9%. (See Stryker Hedge Fund Trading Activity on TipRanks)

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