Walmart qualifies for a $2.9 billion tariff refund, and shoppers are the ones who get to spend it.
The retail giant said Thursday that it qualifies for that massive tariff refund from the government, and the money is going straight back into lowering prices. Here is what happened and why the market is grumpy despite a solid quarter.
Walmart's fiscal second quarter, which ended July 31, looked strong on the surface. Revenue climbed 5.9% to $187.94 billion, up from $177.40 billion a year earlier. Online shopping kept booming, with global e-commerce sales jumping 23%.
Analysts surveyed by LSEG had expected just 74 cents. The company also got a boost to its gross profit margin, which rose to 25.4%, partly thanks to that tariff refund.
But the market cares about one number above all others when it comes to Walmart: U.S. comparable sales, which measures growth at stores open at least a year. A 0.8% headwind from health and wellness, tied to drug price caps, dragged on the number.
On an accounting basis, profit fell to 80 cents per share from 88 cents, and net income came in at $6.37 billion versus $7.03 billion in the same quarter last year. The adjusted earnings figure excludes an investment loss and includes a benefit from a tax matter.
Here is the part that affects your wallet directly. Walmart qualifies for about $2.9 billion in tariff refunds from the government, with just under $100 million still waiting to be collected.
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CFO John David Rainey told CNBC the company plans to use that money to lower prices, with the effects showing up starting in the third quarter. That means cheaper groceries and goods on shelves, which matters when fuel prices are adding about $2 billion in extra cost pressure this year.
"Our business is strong," Rainey told CNBC. "We feel really good about the progress we're making."
The refund is a rare bit of good news for shoppers who have been squeezed. Walmart is already lowering prices across categories, including beef, as consumers deal with high fuel and food costs. Rainey noted that higher-income households drove much of the market share gains, and that the company's inventory buildup partly reflects pricier brands.
The company now expects net sales growth of 4% to 5%, up from its earlier 3.5% to 4.5% range. Adjusted earnings per share for the year should land at between $2.80 and $2.87, compared with the previous $2.75 to $2.85 range.
For the third quarter, Walmart expects net sales up 3% to 3.75% and adjusted earnings per share of 62 to 64 cents.
Other parts of the business are humming. Membership fee revenue rose 17% companywide, and Walmart+ set a record for net additions in a quarter. The warehouse club segment pulled in $25.7 billion in sales, up 8.8% year over year, with membership fees up 6%.
Global advertising revenue climbed 38%. International net sales reached $35.2 billion, up from $31.2 billion.
"Consumers are still spending, and real wage growth is keeping pace, so they've been very resilient in this environment," Rainey told CNBC. "But that said, we would love to be able to bring prices down more and see less pressure on their wallets."
The quarter also shows how the company's growth engines are diversifying. Membership fees, advertising, and e-commerce are becoming larger contributors, while the tariff refund gives Walmart room to compete on price and build customer loyalty.
For your portfolio, the takeaway is simpler than it looks. Walmart is betting that passing its refund back to shoppers will win continued loyalty and volume, even if it means thinner margins for a while. The market hates missing sales expectations, but the company is making a deliberate choice: give the money back to customers and trust that they will keep coming through the doors. Whether that bet pays off will show up in the next few quarters, and in the prices you see on the shelf.
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