Quick-service restaurant chains and off-price retailers are Cowen analysts’ top picks for business beneficiaries from the expanded food-stamp benefit that will start in October.
The U.S. Department of Agriculture announced a 25% monthly increase to the Supplemental Nutrition Assistance Program, formerly called the food stamp program, which will amount to $36 each month, bringing the average per-person total to $157 on a monthly basis.
Experts say this still isn’t enough to cover what many families need.
However, Cowen says the additional benefit works in tandem with other programs to help consumers in need.
“Along with the enhanced Child Tax Credit from the American Rescue Plan in March, this is continued massive and historic expansion of the welfare state,” analysts wrote.
“This should offset some of the fiscal drag coming from the pandemic unemployment benefit expirations on Sept. 6.”
The increased benefit, which will reach an all-time high, will give a boost to companies that have exposure to low-income customers including fast-food chains like McDonald’s Corp. /zigman2/quotes/203508018/composite MCD -0.42% , Wendy’s Co. /zigman2/quotes/204070192/composite WEN +0.04% and Yum Brands Inc. /zigman2/quotes/209029767/composite YUM -1.15% chains including Taco Bell. The additional benefit “reduces the need to resort to lower-margin value offerings,” Cowen said.
Off-price retailers like TJ Maxx parent TJX Cos. /zigman2/quotes/203136811/composite TJX +0.68% and Burlington Stores Inc. /zigman2/quotes/203203718/composite BURL +1.88% are also “best positioned,” analysts said. A quarter of MarMaxx customers and 34% of Burlington customers receive food stamps, analysts say.
The SPDR S&P Retail ETF /zigman2/quotes/206947004/composite XRT +2.99% has gained 45.3% for the year to date, outpacing the benchmark S&P 500 index /zigman2/quotes/210599714/realtime SPX +1.05% , which is up 18.2% for the period.