Walmart: Obamacare Could Hurt Holiday Spending

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Walmart Lowers Earnings Estimate After Weak Second Quarter
Scott Olson/Getty Images
By Kate Rogers

Looks like the Affordable Care Act has another potential critic: Walmart (WMT).

The discount retail giant mentioned the ACA as a potential factor that will hurt consumer spending this holiday season on an analysts press call Thursday.

"While it is not coming through in customer research, we do know that some of our customers are concerned about the impact of the Affordable Care Act," Carol Schumacher, vice president of investor relations said, according to the Wall Street Journal. "For many of our customers, having to afford health care and insurance may be another line item in their personal budget that they may not have had to cover previously."

FOXBusiness.com reached out to Walmart for additional comment, but a spokesperson was not immediately available.

The retailer listed many reasons consumers might pull the purse strings tight this shopping season, and specifically pointed to the individual mandate requirement of the ACA as having the potential to weigh on consumers' budgets.

Come 2014 all Americans are mandated to have health insurance or they will face a fine of $95 per year or 1 percent of their annual salary, starting April for every three consecutive months they are not covered.

And while those making up to 400 percent of the federal poverty level, which comes to about $45,000 for individuals and $94,000 for a family of four, are qualified to receive subsidies, according to the Kaiser Foundation, others could be facing a hefty bill for the care they are now federally mandated to have.
The Department of Health and Human Services estimates monthly health care costs for the average American will be about $328 for a mid-tier silver plan, before subsidies.

Sales projections for the 2013 holiday season have been less than jolly before Walmart's accusation. Last week, new figures from Gallup showed consumers plan to spend an average of $704 this year on gifts compared to $786 last year. Back in Septmeber, store traffic measurement firm ShopperTrak, predicted 2013 was supposed to be the weakest shopping since 2009. Retail sales for November and December, which is when the bulk of holiday shopping is done, were expected to rise 2.4 percent, less than the 3 percent increase in 2012 and the 4 percent increase in 2011 and 2010.

Chris Christopher, director of consumer economics at IHS, says potentially-higher insurance premium costs aren't the only reasons bringing down holiday sales projections this year. "It's clear consumers' mood and confidence took a hit in October due to the government shutdown; as did the bickering over the debt ceiling. Consumer sentiment fell a bit further in November as well. And related to the consumer mood, when they see the ACA site not operating very well, they think the government is not effective -- that is a big downer."

Peter Galvin, senior vice president of marketing for SOASTA, a company that performs cloud and mobile testing for brands, says consumers' lack of confidence in the government has shoppers preferring to shop online over brick-and-mortar shops.

"When you see uncertainty in the marketplace on the economic side of things, it gives consumers pause," Galvin says. "They believe they may be able to get better deals online or can control the amount of money they spend and save on gas."

Jack Kleinhenz, chief economist at the National Retail Federation, says overall economic uncertainty will have an impact on consumer spending this holiday season. Health-care for many is a necessity, and not just an optional expense, he says.

"There are so many uncertainties in the economy this year," Kleinhenz says. "To the effect of consumers receiving cancellation notices ... this is certainly politically a problem and health-care is likely to be more expensive. There are budget challenges for consumers. But at the same time, the economy has been performing."

Consumers may decide to rein in their spending this year in anticipating of higher health-care cost next year, Christopher says. "There are a lot of people who think costs will increase next year and they are worried about that. But that is not what is driving the overall decline in holiday sales. There just has been a loss of consumer confidence and momentum over the past few months."

Comparatively, sales were weak in 2012, so spending may appear to be better this year, Christopher says.

"Year over year, things may not look so bad. Last year's spending was above water, but it still wasn't a great holiday season -- we had Hurricane Sandy, the fiscal cliff crisis, and there was the school shooting [at Sandy Hook] in Connecticut that kept people out of the malls for a bit," he says. "So it may be possible that holiday sales will look stronger than last year, but only because last year was very weak."

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pllove49

Budget challenges for consumers?...........like anyone really cares.......ho ho ho

November 19 2013 at 8:52 AM Report abuse rate up rate down Reply