Costco to Begin Accepting Food Stamps Chainwide

MARK HAMSTRA

ISSAQUAH, Wash. — Despite its initial resistance, Costco Wholesale Corp. here said last week that it would soon begin accepting food stamps at its warehouse clubs across the U.S.

The move follows initial tests of the program in six locations in New York state. In May, the company reluctantly agreed to begin testing acceptance of food stamps at two New York City clubs, one each in the boroughs of Queens and Brooklyn, after coming under pressure from local officials concerned about expanding access to fresh foods for low-income city dwellers. Of particular concern to some lawmakers was the company's plan to open a new warehouse in Harlem, a low-income neighborhood in Manhattan. That store is slated to open this month.

Costco soon rolled the test out to the rest of its clubs in the state.

“The test locations worked well, and that's why we are expanding it,” a spokesman for the retailer told SN last week.

The company declined to comment further other than to confirm press reports about the expansion of the program.

According to those reports, Costco is seeking to roll out acceptance of food stamps (now known as SNAP, or the Supplemental Nutrition Assistance Program) to as many of its 420 locations in the U.S. and Puerto Rico as possible by Thanksgiving.

The move comes as the number of Americans enrolled in the SNAP program has grown during the economic downturn, and recently reached a record high of 36 million.

Costco previously had said it did not believe that its customers — about half of whom are small-business owners — would be receptive to the program.

“We recognize these are tough times and more people are food-stamp-eligible,” Costco Chief Financial Officer Richard Galanti was quoted as telling USA Today last week.

Costco previously said it also had been concerned that accepting SNAP benefits would slow down the checkout process, but that has not proved to be the case, the company said.

Costco's two largest rivals in the warehouse space, BJ's Wholesale and Wal-Mart's Sam's Club chain, both accept SNAP benefits.

In its fourth-quarter conference call with analysts last month, Costco said it had been seeing additional members join the club specifically because it accepted SNAP benefits.

“It's not just a question of whether we get some additional sales from an existing member,” Galanti said in the call. “We're finding we're getting new members that didn't shop at Costco because we didn't have [food stamps]. And I would expect that some of those have chosen to move over from our competitors.

“I think also that our view was we would not get a lot of food stamps because our member on average is a little more upscale,” he said. “I think that was probably a little bit arrogant on our part. Certainly this economy was a wake-up call. It is not just very low-end economic strata that are using these that typically don't have purchasing power. It's a lot of people that are using this as a source of their overall consumption.”