Costco expands food stamp program to third store

PORTLAND, Ore. -- Costco Wholesale Corp., facing political pressure, said Friday that it will expand its new food stamp program to a third New York store that is under development.

Costco, one of the nation's largest wholesale club chains, announced Wednesday that it is equipping two of its New York stores to accept food stamps as part of a pilot program that will launch this summer. The company said if the pilot went well, it would accept food stamps at any future clubs in New York.

The news prompted heavy criticism from some New York officials, including New York Attorney General Andrew Cuomo, who wrote a letter to the Issaquah, Wash.-based company, criticizing the retailer for not immediately committing to accept food stamps at a soon-to-be opened East Harlem store.

The East Harlem site is in a redevelopment area with a heavy concentration of food stamp users. Costco received public financial assistance to build there, but Cuomo said by not committing to accepting food stamps at the store, it is violating the spirit of the redevelopment project.

Costco said it also received a phone call from Congressman Charles Rangel regarding the issue. The company said Friday that its program was "misunderstood by some" and wanted to clear up any confusion on the issue following the phone call from Rangel.

Costco Chief Executive Jim Sinegal said "we now understand the special sensitivity in New York to this long-awaited project in his district."

Sinegal said it was always Costco's intention to include the new East Harlem store in the food stamp project, either as part of the ongoing test or as a permanent fixture depending on the exact opening date.

The company said it did not specifically mention the East Harlem site because the company wanted to be inclusive of all its planned locations, some of which have not been publicly announced.

Costco Chief Financial Officer Richard Gallanti said in a conference call with investors Thursday that the company has had "a lot of pressure, including political pressure in the city and state of New York" regarding the need to accept food stamps there.

Cuomo applauded the company's decision Friday, saying in a statement: "In these difficult fiscal times, this decision will provide relief to the thousands of residents in the community that rely on food stamps to provide for their families."

Costco has not responded to a phone call to clarify if food stamp programs may be expanded to its more than 400 other stores in U.S. in the future.

Shares of Costco rose 55 cents to $48.52 in afternoon trading Friday.