At Walmart, billions in tariff refunds soften the blow from slower sales growth

Walmart says it has received nearly $3 billion in tariff refunds — and used some of that windfall to cut prices for consumers strained by inflation.

The refunds helped boost Walmart’s profit, according to the company’s quarterly earnings report Thursday.

“Customers tell us they’re still feeling some pressure,” Walmart CEO John Furner said. “Having the best prices across a basket of goods helps us continue to build trust with our customers and members by helping them save money at a time when many households are carefully managing their budgets.”

But the rosy picture on the income front was marred by slower U.S. same-store sales growth. Coming in at just 2.6%, it was the lowest Walmart has reported in years.

Wall Street, which is accustomed to robust growth from Walmart, reacted swiftly to the lukewarm sales numbers, and the company’s stock plunged 9% Thursday morning. Walmart shares are down more than 20% from their recent high in May, and the company has fallen out of the $1 trillion club.

Walmart attributed the disappointing sales growth in part to new federal drug pricing rules that slashed the price of several expensive medications for Medicare enrollees.

The company is also expecting more than $2 billion in added costs from higher fuel prices this year, a result of soaring global oil prices stemming from the U.S. and Israel’s war with Iran.

As the country’s largest private employer and one of its biggest retailers, Walmart and its quarterly earnings reports are typically viewed as a bellwether for how the U.S. consumer is faring and, by extension, the economy writ large. Consumer spending accounts for roughly 70% of U.S. gross domestic product.

Walmart’s second-quarter earnings report points to consumers who are navigating a double whammy of rising prices from Trump administration tariffs and the Iran war.

The inflation rate in July was 3.4% , a jump from the 2.4% inflation rate right before the war. Consumer prices are outpacing wage increases, which grew at a rate of 3.2% last month.

The national average for a gallon of regular gas has soared from $2.98 right before the war to $4.10 Thursday, according to AAA.

Those higher fuel prices, Walmart says, are prompting consumers to make trade-offs.

“As you go through month by month in the last quarter, you can tell when fuel prices increased and got above $4, and perhaps there’s a psychological impact to that, that there are choices that consumers are making,” said John David Rainey, Walmart’s chief financial officer. “It’s why we have leaned so heavily into lower prices.”

Walmart said its U.S. business had more than 11,000 rollbacks in the second quarter, including price cuts for summer barbecue items.

The big-box retailer has also benefited from wealthier consumers’ trading down as Americans tighten their budgets.

It said it saw strong performance in membership, fast delivery, and categories like fashion and college decor.

“The fact that we’ve got more elevated brands, more expensive merchandise that appeal to a broader cohort of customers is affecting our business and our results,” Rainey said.

Walmart’s earnings come on the heels of rival Target’s earnings report Wednesday, as Target invests in store remodels and collaborations with brands like Hollister, LoveShackFancy and Roller Rabbit. Target said it received nearly $1 billion in tariff refunds — and said it has reduced prices for more than 10,000 items in the last year.

The U.S. has already doled out around $100 billion in tariff refunds, according to a recent court filing by U.S. Customs and Border Protection. That windfall has been disbursed to importers, leaving companies to decide whether to pass any of it along to consumers.

Last quarter, Walmart signaled it might raise prices to help compensate for soaring fuel costs, though it’s unclear if the company followed through on that.

Walmart has also sought to compete with tech-forward giant Amazon, which recently overtook Walmart as the world’s largest company by revenue.