(CNN) — Walmart posted solid sales and profits in the latest quarter, helped by online spending and a massive $2.9 billion tariff refund, the largest yet reported.
But store sales disappointed investors as consumers pulled back in the face of higher gas prices.
The nation’s largest retailer earned $6.4 billion in net income in the three months ending July 31, better than the company’s earlier guidance. It also raised its forecast for the year.
Still, Walmart shares (WMT) fell more than 8% 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 partly due to lower drug pricing for GLP-1 weight loss drugs, as well as more customers shopped online. Walmart is often viewed as a bellwether for the strength of consumer spending.
The company also told investors it is eligible for approximately $2.9 billion in tariff refunds, or the money it will get back from the government for tariffs paid on imports in 2025 and early 2026. To date, it has received most of the money. Walmart said it would invest the tariff refunds in “customer experience and price investments,” or price cuts.
Walmart said that higher gas prices are cutting into American’s ability to spend on other things. CFO John David Rainey said there is “arguably a softer consumer environment than in February.”
“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,” said Rainey, 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.”
Walmart is not the only big retailer logging big tariff refunds during the latest quarter. 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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