May 27, 2009 in News

Costco experimenting with food stamps

The Associated Press
 

ISSAQUAH, Wash. (AP) — Responding to the economic pressures on its shoppers, Costco Wholesale Corp. said Wednesday that it will soon install the equipment to accept food stamps at two of its New York City stores as part of a pilot program.

Costco, one of the nation’s largest wholesale club chains, said its future New York City locations also will be equipped to accept food stamps as payment if the pilot goes well. A company representative was not immediately available to discuss whether Costco would expand the service to its more than 400 other stores in the U.S.

Costco, which reports its earnings Thursday, is the latest of several discounters to begin accepting food stamps as job losses and other economic pressures take their toll on consumers.

BJ’s Wholesale Club announced in April that all of its 180 stores will begin accepting electronic food stamp for payment. And discounter Family Dollar Stores Inc. is in the midst of making all its stores capable of accepting food stamps, the federal subsidy for unemployed and very low-income people.

Costco said it expects the trial stores in Queens and Brooklyn, which were selected because of the high penetration of food-stamp recipients in their areas, will be equipped by early summer with the technology to accept food stamps.

“In the past, we have not been convinced that there was sufficient demand among our membership to justify the expense and possible inefficiencies associated with accepting food stamps,” Costco Chief Executive Jim Sinegal said in a statement. “However, we are mindful that many of our fellow citizens are facing unprecedented economic challenges at this time, and it seemed to us that it was worth reconsidering our position in that light. We are taking this step to see if we can be a part of the solution to the financial burden that many people are facing today.”

The Issaquah, Wash.-based company said it will look at whether the food stamp acceptance meets customer demands and does not slow down its front-end operations.

New York Attorney General Andrew Cuomo criticized the retailer in a letter Wednesday for not immediately committing to accept food stamps at its East Harlem store, which is still under development.

Costco could extend the program to the store if the pilot goes well.

The East Harlem site is in a redevelopment area, which means the company has received public support. The attorney general’s office said that by not accepting food stamps there, Costco is violating the purpose of tax-exempt financing it has received. An estimated 30,000 residents in East Harlem use food stamps.

Cuomo said there is “no justifiable business rationale” for not accepting food stamps at all its stores.

Shares of Costco closed down 31 cents at $48.83 Wednesday but rose slightly in after-hours trading following the announcement.


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