US Retailers Get Tariff Refunds, Boosting Q2 Profits After Supreme Court Ruling
Following a February Supreme Court ruling that the International Emergency Economic Powers Act does not authorize presidential tariffs, major US retailers received tariff refunds in the second quarter, lifting profits. Home Depot received $730 million, Walmart about $2.9 billion, TJX $331 million, Lowe's $80 million, and Target $752 million. The refunds improved margins and earnings, with varying uses and reporting treatments.
After the US Supreme Court ruled in February that the International Emergency Economic Powers Act does not authorize the president to impose tariffs, several large retailers applied for refunds. The payments arrived in the second quarter and provided a notable boost to retailers' profits. Companies differed in how they treated and reported the refunds.
Home Depot received $730 million in tariff refunds in its fiscal second quarter, of which about $685 million was used to reduce cost of goods sold, lifting its gross margin by 0.3% year over year. Walmart was eligible for about $2.9 billion in refunds, with less than $100 million still outstanding. Its US operations saw gross profit rise 1.6% as a result, and the company plans to use the refunds to lower product prices, with the impact expected in the current fiscal third quarter. TJX Companies recorded $331 million in refunds received as a reduction to second-quarter cost of sales.
Lowe's received about $80 million in refunds, boosting earnings per share by 11 cents. The company said it does not plan to use the refunds to cut prices as some competitors have. Target lowered prices on more than 10,000 items in the second quarter. It said the tariff refunds provided a $752 million boost to net earnings, or $1.65 per share, and a $994 million pretax benefit to second-quarter gross margin and operating profit. Kohl's allocated $100 million of the refunds received to second-quarter gross margin, with the remainder earmarked for deeper inventory investment.
These one-time refunds made year-over-year comparisons favorable for retailers this quarter, while also setting a higher base for the next year's comparisons. Additionally, retailers have increased spending on supply chain diversification and flexibility. Consumers may find it difficult to quantify whether price cuts are commensurate with the scale of refunds, and inflationary pressures such as rising fuel prices will also affect product pricing.