Walmart received nearly $3 billion in tariff refunds that helped boost quarterly profit, but slower U.S. same-store sales growth of 2.6% and a 9% stock drop followed Thursday. The retail giant faced mounting cost pressures from soaring fuel prices tied to the Middle East conflict and federal drug pricing rules.
Tariff Windfalls and Slower Sales Growth at America’s Largest Retailer
As the country’s largest private employer and one of its biggest retailers, Walmart and its quarterly earnings reports serve as a bellwether for how the U.S. consumer is faring and, by extension, the economy writ large, where consumer spending accounts for roughly 70% of gross domestic product. The company received nearly $3 billion in tariff refunds — and used some of that windfall to cut prices for consumers strained by inflation, according to its 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.
Yet that positive financial cushion contrasted sharply with tepid retail activity. Same-store sales growth in the U.S. crawled to just 2.6%, marking the lowest level the company has reported in years. Wall Street, which is accustomed to robust growth from Walmart, reacted swiftly to the lukewarm sales numbers, and Walmart shares plunged 9% Thursday. Walmart shares are down more than 20% from their recent high in May, and the company has fallen out of the $1 trillion club.
Escalating Fuel Costs, Tariff Pressures, and Changing Consumer Behavior
Behind the slower sales growth lies a complex mix of macroeconomic pressures. Walmart executives pointed to a double whammy of rising prices stemming from Trump administration tariffs and the U.S. and Israel’s war with Iran, which drove up global oil prices. 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. Concurrently, 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.
From Instagram — related to walmart tariff refunds soften, John David Rainey
“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. It’s why we have leaned so heavily into lower prices.”
John David Rainey, Walmart’s chief financial officer
To combat consumer fatigue, Walmart said its U.S. business had more than 11,000 rollbacks in the second quarter, including price cuts for summer barbecue items. Executives noted that cash-strapped shoppers are making trade-offs, while wealthier consumers are trading down as Americans tighten their budgets. The big-box retailer also 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
Broader Industry Context and Unresolved Questions for the Retail Sector
Walmart’s earnings arrive 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. Across the broader economy, 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.
Walmart seeks billions in tariff refunds, experts say it could lead to lower pricesPhoto: Nbcnews
Beyond macroeconomic headwinds, 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. Furthermore, 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. While last quarter Walmart signaled it might raise prices to help compensate for soaring fuel costs, it’s unclear if the company followed through. Walmart has also sought to compete with tech-forward giant Amazon, which recently overtook Walmart as the world’s largest company by revenue.
Walmart hikes full-year outlook, says it will use huge tariff refund to keep prices low
Omar El Sayed is Archyde’s World Editor, focused on international affairs, diplomacy, conflict, and cross-border political developments. He brings a global newsroom perspective to complex events and helps readers understand how regional stories connect to wider geopolitical shifts.
