Big-Box Briefing: Retailers get direct tariff relief. Their shoppers likely won’t
This is the latest installment of the Big-Box Briefing, a weekly Modern Retail+ column about the strategies of major retailers. More from the series →
Tariff refunds are great news for the corporate balance sheets of big-box retailers, and less so for consumers tightly squeezing their wallets.
Over the last several weeks, major retailers have begun reporting refunds they have received from the Trump administration. This follows the Supreme Court ruling in February that found tariffs imposed under the International Emergency Economic Powers Act (IEEPA) to be illegal. The administration has refunded about $100 billion in tariff revenue, according to CNBC.
Shoppers could benefit, as some, but not all, retailers are investing their refunds into lowering prices. Retailers largely are not pursuing direct payments to customers. Still, some shipping carriers, such as UPS, FedEx and DHL, have said they will send refunds to customers in cases where they directly charged customers for tariff costs, according to CBS News. Amazon CFO Brian Olsavsky said the company may also, in some cases, issue refunds to customers to whom it can trace specific import charges.
“Consumers are likely to benefit, but most will not experience it as a tariff refund,” said Peter Ramer, a consumer products senior analyst for tax and consulting firm RSM U.S. “They will see it through selective price cuts, more promotions and fewer price increases than they otherwise might have faced. The impact will be real, but it will probably be dispersed across thousands of products and difficult for an individual shopper to isolate.”
Because tariffs are absorbed into the cost of inventory, and not typically itemized on the receipt, there’s no clean trail connecting a specific duty payment to a customer purchase. “Retailers are not necessarily refusing to trace the money back to the consumer,” Ramer said. “In most cases, the one-to-one link simply does not exist.”
Target received $994 million in pre-tax tariff refunds during the second quarter, the company reported in its earnings release last Wednesday. The next day, Walmart CFO John David Rainey told investors that it has received about $2.9 billion in tariff refunds. These mass retailers promised to invest in price reductions.
Walmart CEO John Furner said there will be a combination of rollbacks across categories such as food, general merchandise, consumables and fashion, and that they may be more noticeable next quarter. “We’re proud of the reductions, and it’s helpful for customers as we get into the back half.”
The Home Depot EVP and CFO Richard McPhail told investors his company’s $730 million in tariff refunds would offset unplanned and rising cost pressures throughout the year, and that the company has already applied most of this toward the cost of goods that have already been sold. The company has been under pressure due to consumer uncertainty and the nation’s lack of housing affordability, which affects spending on materials for home projects.
“What tariff refunds allowed us to do was offset increased costs in our environment, and it allowed us to maintain values in the market,” McPhail said. “If you think about it, tariff refunds are a market-borne benefit. They’re not unique to The Home Depot.”
Still, Ramer said consumers aren’t likely to perceive a price that didn’t go up. “There’s no moment where you feel it, no line item on the receipt, no email saying, ‘Here’s your $12,’ so the benefit gets delivered and goes unnoticed at the same time.” He expects big-box retailers to focus their price adjustments on value products that drive traffic, rather than the products on which the duties were actually paid.
“The household that paid tariffs on an imported small appliance is going to get its rebate in the form of cheaper ground beef,” Ramer said. “In aggregate, the money reaches the consumer, but at the individual level, it almost never finds the person who bore the cost.”
Additionally, some products are still subject to tariffs, and prices are also being impacted by macroeconomic factors such as fuel prices. Akshay Rao, a marketing professor at the University of Minnesota, said he believes retailer C-suites will focus on customer price expectations and what the competition is doing, or look at data to see how important price reductions are in increasing demand.
“The customer is not looking totally at prices and prices alone,” Rao said. “They’re looking at a variety of factors that impact their lives, including the cost of gasoline, the cost of groceries, the state of uncertainty in the environment, the prospect of midterm elections, … and all the stuff that’s going on in D.C.”
“There is a considerable amount of uncertainty in the world that has an impact on how people feel safe and secure in their lives, and that has an impact on how they spend money,” Rao added. “It’s a trifle more complicated than what happened to the tariff refund [retailers] got.”
What we’ve heard
“The big thing for us as we look at AI: It’s been about real-time data, it’s been about getting closer to the consumer in more real time, and it’s about partnering with our retailers on how we see the consumer behaving, so that we can iterate faster and more meaningfully with the consumer. It’s all about real-time data, faster decisions and then optimization, both in-store and online.”
–Stephanie Berman, vp of retail at The Hershey Company, regarding how the company is using AI to work with major retailers
Numbers to know
38%: Growth of Walmart’s global advertising business in the second quarter.
10%: Increase in comp sales at Ross Stores Inc. since last year as the company has been elevating its merchandising.
3 hours or less: Timing of Home Depot’s new express delivery for eligible plumbing, hardware, paint and tools.
What we’ve covered
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Target’s new beauty section in stores and online has attracted many new brands to the retailer for the first time. For some, this is their first entry into retail stores entirely. Target Beauty Studio will launch Sept. 10 in more than 600 Target stores and on Target’s website, the company said on Wednesday. The department will feature more than 1,600 products from 90 brands, with more than two-thirds of the brands being new to Target. The products include skin care, makeup, hair care, fragrance, bath/body and nails.
Dick’s Sporting Goods says it remains bullish on its Foot Locker business, even as it lowered its yearly guidance for the segment, citing “challenging conditions” in the athletic footwear market. Dick’s Sporting Goods, as a whole, is also dealing with macroeconomic and geopolitical concerns such as higher fuel costs and supply chain headwinds. These, too, “weighed on profitability during the quarter,” executive chairman Ed Stack said.
Walmart finally starts supporting Apple Pay and Google Pay
By the end of this year, shoppers will finally be able to use Apple Pay and Google Pay in Walmart stores, ending years of frustration that the retailer didn’t support what is now a nearly ubiquitous payment option. Walmart will begin to support contactless payment methods at select Walmart stores and Sam’s Club locations beginning Aug. 24, with plans to roll it out to all U.S. stores and clubs by the end of 2026 and to fuel stations by mid-2027, the company said Friday.
What we’re reading
Target faces renewed backlash after stocking Halloween costume with ‘minstrel show features’
Target pulled a children’s Halloween costume from its shelves Monday after social media backlash and criticism that it was similar to racist Jim Crow-era minstrel caricatures, the Associated Press and other outlets reported. “As a company, we know we got this wrong, and we are deeply sorry,” Target said in a statement. “The costume is offensive and should never have been part of our assortment. It is no longer available for sale.”
Walmart keeps pushing into fashion with new clothing brand
Walmart plans to introduce a new store brand of women’s clothing, bags and other accessories as part of its push to appeal to younger, trendier shoppers, The Wall Street Journal reported. Most of the new line, called Scenario, will cost less than $25, in hopes of appealing to discount shoppers. It will take up some of the space held by Time and Tru, the store brand Walmart introduced in 2018, according to the outlet.
Walmart’s chief communications executive to leave company
Walmart’s head of communications is stepping down early next year, and the company is looking for an external replacement, according to Bloomberg. Allyson Park has been with the company for more than three years and will leave on Feb. 1. This follows several other departures from the C-suite and other leadership positions after John Furner’s appointment as CEO.