Costco Says It Will Accept Food Stamps as Gov’t Food Subsidy Use at Record High

October 28, 2009 - 2:29 PM
Costco Wholesale Corp. said Wednesday that it will start accepting food stamps at its warehouse clubs nationwide after testing them at stores in New York.
Portland, Ore. (AP) - Costco Wholesale Corp. said Wednesday that it will start accepting food stamps at its warehouse clubs nationwide after testing them at stores in New York.
 
It's a big about-face for a retailer that has catered to bargain-hunting but affluent shoppers, and it's a sign of the grim reality facing retailers and their customers. The number of Americans relying on government food subsidies to eat recently hit a record 36 million.
 
Costco, which is based in Issaquah, Wash., began accepting food stamps at two stores in Brooklyn and Queens in May under political pressure from officials who worked with the company on opening a club in a redevelopment area in Manhattan.
 
The company quickly expanded to all six of its stores in New York state.
 
Company officials said they had doubted many customers would use food stamps but it turned out new members said they were joining precisely because the company accepted the assistance program.
 
"We recognize these are tough times and more people are food-stamp-eligible," Costco Chief Financial Officer Richard Galanti said Wednesday.
 
Costco said it hopes to accept food stamps at half of its 407 stores in the U.S. and Puerto Rico by Thanksgiving and at the remainder as soon as it wins regulatory approval in each state.
 
While most major grocery chains have accepted the food subsidy for years, more retailers have been accepting food stamps as the process has eased and the number of people using them has soared.
 
Most users no longer receive stamps, but instead carry the value on a card that can be swiped at checkout much like a bank debit card.
 
That makes it easier and more discrete for shoppers and speeds the checkout and reimbursement processes for retailers.
 
Because about half of Costco's customers are small businesses and the rest tend to be more affluent than shoppers at traditional grocery chains, Galanti said, executives had assumed there wouldn't be much response to it accepting food stamps but realized that assumption may have been wrong.
 
"Certainly this economy was a wake-up call," Galanti recently told investors. "It is not just very low-end economic strata that are using these (who) typically don't have purchasing power."
 
Food retailing consultant Bill Bishop, of Willard Bishop Consulting, said Costco's decision shows how pervasive the pressure on consumers has become. He said more and more grocers are seeing their sales peak and fall based on when assistance benefits are distributed.