Walmart reported its weakest same-store sales growth since the first months of the Covid-19 pandemic, even as the retailer pledged to funnel a $2.9 billion tariff refund into lower prices for cash-strapped consumers.
The nation's largest retailer said U.S. same-store sales, excluding fuel, grew just 2.6% in the quarter ending July 31, nearly half the 4.6% pace a year earlier. Walmart's stock dropped more than 9% in early trading Thursday after the results landed. Net income for the quarter came in at $6.4 billion, but the headline number masked a consumer picture that CFO John David Rainey described on the company's earnings call as notably weaker than it was six months ago.
Rainey pointed to gas prices as the single biggest drag. With fuel costs pushing past $4 a gallon in much of the country, he told analysts the impact goes beyond the pump.
"There's a psychological impact to that. That there are choices that consumers are making."
Those choices show up in the data. Higher gas spending is crowding out other purchases, producing what CNN reported as the slowest U.S. sales growth at Walmart since February through April of 2020, the earliest, most disruptive stretch of the pandemic.
Walmart's quarterly results arrived alongside a separate development: the company disclosed it had received $2.9 billion in tariff refunds from the federal government, the largest such refund yet reported by any single company. Walmart said it plans to put that money toward "price investments", industry shorthand for cutting prices on goods consumers actually buy.
The refund traces back to a Supreme Court ruling in February that struck down President Donald Trump's most sweeping tariffs as illegal. The government began issuing refunds in May from the $168 billion it had collected from roughly 330,000 importers. A court filing by U.S. Customs and Border Protection showed that as of July 31, $100 billion in refunds had already gone out the door.
Walmart was far from alone. Target reported receiving $994 million. Home Depot disclosed $730 million. TJX, the parent company of TJ Maxx, Marshalls, and HomeGoods, collected $331 million. Lowe's received $80 million. Apple, Nike, Amazon, and FedEx all reported tariff refunds during their most recent earnings, though none disclosed specific dollar amounts.
Walmart's CFO did not sugarcoat conditions. Rainey told analysts the company faces what he called "arguably a softer consumer environment than in February," before gas prices spiked. He framed the pressure as straightforward.
"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."
Beyond fuel, Walmart flagged two other forces reshaping its sales mix. Lower drug pricing on GLP-1 weight-loss medications, the blockbuster class that includes popular brand-name drugs, cut into pharmacy revenue. And a continued shift toward online shopping pulled transactions away from physical stores, contributing to the in-store slowdown.
For a company that has long served as a barometer of working-class spending, the quarter paints a clear picture. Families are not stopping their shopping. But they are making hard trade-offs, filling the gas tank first and trimming everywhere else.
The $2.9 billion refund gives Walmart a rare opening. The company says it will invest the money in price cuts, which would amount to a direct benefit for the millions of Americans who shop its aisles every week. Whether those reductions are broad enough and deep enough to offset the squeeze from $4-plus gas remains an open question.
Across the retail sector, more than $100 billion in tariff refunds has already flowed back to importers. That is real money, collected from businesses, returned by court order, and now theoretically available to lower costs for consumers. The test is whether companies actually pass the savings along or quietly absorb them to shore up margins.
Walmart, to its credit, has publicly committed to price cuts. Shareholders, staring at a 9% stock drop in a single morning, may be less enthusiastic about the plan. But for the families budgeting around a $60 fill-up, cheaper groceries matter more than share price.
When the nation's biggest retailer says consumers are making hard choices, Washington ought to listen, because the people making those choices don't have a $2.9 billion refund check to fall back on.