Walmart promises price cuts after $2.9 billion tariff refund

By Chris Isidore, CNN

(CNN) — Higher gas prices cut into Americans’ overall spending, leading to the slowest sales growth at Walmart’s US stores since the earliest months of the pandemic.

The nation’s largest retailer earned $6.4 billion in net income in the three months ending July 31, thanks to strong online spending and a massive $2.9 billion tariff refund, the largest yet reported.

Still, Walmart shares (WMT) fell more than 9% in early trading Thursday after sales growth at US stores, excluding fuel, rose only 2.6% in the quarter compared to 4.6% a year ago. That’s the slowest since February through April of 2020.

Walmart is often viewed as a bellwether for the strength of consumer spending. The slower growth in stores is partly due to lower drug pricing for GLP-1 weight loss drugs, as well as more customers choosing to shop online rather than in physical stores.

But overall, higher gas prices are cutting into American’s ability to spend on other things. CFO John David Rainey said Thursday there is “arguably a softer consumer environment than in February” before gas prices spiked.

“It sort of states the obvious, (we are) seeing some incremental pressure on the consumer relative to the beginning of the year with higher fuel prices,” Rainey said on an earnings call, adding that when gas prices get over $4 a gallon, “there’s a psychological impact to that. That there are choices that consumers are making.”

The company told investors it will use the $2.9 billion it received in tariff refunds to invest in “price investments,” or price cuts, for consumers to help spur spending.

Walmart is not the only big retailer logging big tariff refunds, or the money companies will get back from the government for tariffs paid on imports in 2025 and early 2026. Earlier this week, big box rival Target reported its refund came to $994 million. TJX, which operates chains including TJ Maxx, Marshalls and HomeGoods, got $331 million. Home improvement stores Home Depot and Lowe’s reported $730 million and $80 million refunds, respectively.

The Supreme Court ruled in February that President Donald Trump’s most sweeping tariffs were illegal. In May, the government began issuing refunds from the $168 billion collected from 330,000 importers. As of July 31, $100 billion had been sent out, according to a court filing by the US Customs and Border Protection (CBP).

It’s not just retailers booking large refunds from past tariff payments. Apple, Nike Amazon and FedEx, among others, have all reported refunds during their most recent earnings results.

– CNN’s Elisabeth Buchwald and Nathaniel Meyersohn contributed to this report

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