It continues . . . Wal-Mart Says Insurance Costs May Hurt Customer Spending - New Upfront Expense Could Add to Other Recent Headwinds for Shoppers

From The Wall Street Journal:

Wal-Mart Stores Inc. has a long list of reasons why its customers aren't spending as much as hoped: the payroll tax cut expiration in January, the November rollback of food stamp benefits, continued uncertainty in Washington.

Now, the world's largest retailer is hinting at a new one: the looming individual mandate to buy health insurance under the Affordable Care Act.

The company attributed a third consecutive drop in U.S. comparable-store sales to a laundry list of macro-economic headwinds when it reported its quarterly earnings last week. Wal-Mart, which is forecasting continued gloominess through year-end, also told analysts it is now watching to see if the health-care law will take yet another chunk out of customers pocketbooks.

"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, told analysts Thursday. "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."

True Value Co., the hardware store cooperative with 4,600 locations, was more emphatic about the potential impact.

"This has been a massive concern for us," True Value Chief Executive John Hartmann said in an interview Friday. "Discretionary spending will certainly be impacted by the changes in the contribution Americans will have to make for health care."

Companies and their top executives haven't been shy about complaining about the financial and administrative burdens of the health care overhaul. But it is rare for them to draw a connection to their own sales prospects.

Wal-Mart, which says it sees 140 million customers a week, said it is keeping an eye out for an impact on its customers. "It's something we'll be looking at as we go into the next year," Ms. Schumacher said.

The 2010 health law is expected to reduce the number of uninsured Americans by 25 million over the next decade, according to the Congressional Budget Office, though many will be covered by Medicaid rather than by having to pay for private insurance, if their income is low enough.

Starting on Jan. 1, most Americans will be required to carry insurance or pay a penalty that starts at $95 a year, or 1% of their taxable income, whichever is greater. The penalty goes up in subsequent years. By 2016, it will be $695 for each adult, or 2.5% of a person's taxable income.

It is hard to tell how those costs might affect retailers. Many people are already covered by employer plans and won't be affected. People earning up to just above the poverty level in most states will be able to enroll in Medicaid, the federal and state funded health-care program for the poor.

For others, the hit to their pocketbooks will be defrayed by government subsidies. Insurance costs will be reduced by a sliding scale of government subsidies for people earning up to 400% of the federal poverty level.

Still, Wal-Mart has been signaling to investors that it could feel a pinch. Bill Simon, president of Wal-Mart U.S., hinted at an investor conference in October that the process and cost of signing up for care could be a further weight on customers already weathering the 2% hit to their paychecks from the payroll tax cut's expiration.

At the time, the government's health-care exchanges were two weeks into their troubled rollout, and Mr. Simon pointed to "the uncertainty in health-care costs as people still figure out how to register and what their costs are going to be."