Food Retailers Troubled By This Chart

Consumer staples and food retail equity analyst Scott Marks at Jefferies told clients Saturday that one of the most concerning charts for food retailers is the sharp decline in average benefits per SNAP participant under the Trump administration, as the USDA intensifies efforts to root out fraud, waste, and abuse.

SNAP's elevated payment error rates are setting up a new fiscal fight between the Trump administration and states.

Marks said food retailers are caught in the crosshairs:

SNAP error rates set up state cost-sharing showdown. USDA last week released FY2025 SNAP payment error rates, showing a national rate of 10.62% (a modest improvement vs. FY2024) that still translates to roughly $10B in improper payments, with all but 10 states landing above the 6% congressional threshold.

Under the One Big Beautiful Bill Act, FY2025 marks the first year of data that can be used to determine state cost-sharing obligations beginning October 2027, when states above the threshold will be on the hook for 5%, 10%, or 15% of their benefit costs depending on tier.

Combined with already-falling SNAP participants (down ~11.6% y/y to ~37.3mm recipients in March on tighter work requirements), the looming cost shift raises the risk of further benefit tightening or eligibility friction at the state level, which would be an incremental headwind for food retailers and center-store packaged food categories most exposed to SNAP spend.

Here's the chart:

Value-focused food retailers such as Dollar General, Dollar Tree, Family Dollar, 7-Eleven, WinCo Foods, Save A Lot and Food 4 Less are among the most exposed to SNAP spending.

Major grocery and retail names with meaningful SNAP exposure include Walmart, Kroger, Albertsons, Dollar General, Dollar Tree, Costco Wholesale, BJ's Wholesale Club and Ahold Delhaize, the parent of Food Lion, Giant, Stop & Shop, Hannaford and other U.S. grocery brands.

The Trump administration continues to purge SNAP of fraud, waste, abuse and, of course, illegal aliens. Since President Trump signed the OBBBA into law one year ago, enrollment in the food program has fallen to just 37 million people, down 5 million from a year earlier.