Walmart beat on revenue, beat on earnings, raised its full-year outlook, and watched its stock drop 6% before the opening bell. The gap between those two facts is a tariff refund the company has booked, spent in its guidance, and almost entirely not collected.
The retailer reported fiscal second-quarter revenue of $187.9 billion, up 5.9%, against roughly $186 billion expected. Adjusted earnings landed at $0.81 a share versus the $0.74 the Street had modeled. Management lifted full-year adjusted earnings guidance to a range of $2.80 to $2.87, up from $2.75 to $2.85, and raised constant-currency sales growth to 4% to 5%.
Then investors read the line that mattered.
The Number That Moved the Stock
Comparable sales at U.S. stores rose 2.6%. Analysts wanted 3.7%. It was the slowest pace of U.S. comp growth since the fourth quarter of 2020, and a sharp deceleration from the 4.1% Walmart posted the previous quarter. The Associated Press framed it as the slowest U.S. comparable-sales growth in six years, paired with an outlook management itself described in cautious terms.
Walmart has a defensible explanation for part of it. Federal rules requiring pharmacies to dispense certain high-cost Medicare drugs at capped prices took roughly 0.8 percentage points out of the comp. Strip health and wellness out entirely and core merchandise comps grew 3.4%. That is a real adjustment, not spin, and it is the number Walmart would prefer you use.
It still does not get to 3.7%. And it does not explain why a company posting its weakest domestic store growth in six years is simultaneously raising the year.
Where the Beat Actually Came From
Follow the margin. Walmart’s gross profit rate improved by 96 basis points in the quarter, and the company’s own reporting attributes that lift substantially to tariff refunds, arriving even as it invested in lower prices. Operating income rose 28.8% on a reported basis and 17.4% on an adjusted constant-currency basis. That is a very large spread between a headline profit number and the underlying operating one, and refunds sit in the middle of it.
Chief Financial Officer John David Rainey put a figure on it in an interview with CNBC: Walmart is eligible for approximately $2.9 billion in tariff refunds. He also said the company has so far received less than $100 million of it.
That is under 4% of the money. The margin benefit is in this quarter’s results. The cash is somewhere inside U.S. Customs and Border Protection.
Why the Money Exists at All
The refunds trace back to February, when the Supreme Court ruled 6-3 that the International Emergency Economic Powers Act does not give a president authority to impose tariffs of indefinite scope. The duties collected under it were unlawful. What followed was the largest involuntary rebate in the history of American trade policy.
The scale is genuinely difficult to hold in your head. The National Retail Federation, tracking the process, reports that CBP has accepted roughly $128.68 billion in potential and certified refunds into its processing system, with more than 17.69 million entries already liquidated without IEEPA duties as of the end of July. Refunds flow to whoever was the importer of record. For a company that imports at Walmart’s volume, that is a windfall measured in billions, arriving as a function of past purchasing scale rather than present operating skill.
Walmart is not alone in this. Nike booked a tariff-refund benefit into its own results earlier this summer, which we covered when its fourth quarter landed alongside a direct-sales decline. The difference is what each company is doing with the money.
The Price Cut Is a Weapon
Rainey said Walmart plans to spend the refund on lower prices, with the effect visible in the third quarter. Read that as a strategy document rather than a consumer-friendly press line.
Every importer that paid IEEPA duties is owed money. They are all in the same CBP queue, and phase one of the refund program covers only certain unliquidated entries and entries within 80 days of liquidation. Most of them will wait. What separates Walmart is that it does not have to wait to spend it. A company with Walmart’s balance sheet can cut prices today against a receivable that clears whenever the government gets to it. A regional grocer or a mid-size specialty importer, owed the same duties on the same legal theory, cannot fund a price war on a promise from Customs.
So the refund becomes share. Walmart takes traffic during the quarters when smaller competitors are least able to respond, and the eventual refund cash backfills a margin the company already spent. That is a sound competitive move and worth naming as one.
There is a defensive read too. Retailers are facing consumer class actions alleging that tariff costs were passed through to shoppers and should now be returned. Cutting prices with refund money is a reasonable answer to a plaintiff asking what you did with it.
What Walmart Is Actually Telling You
The parts of this business that are working are working well. Global e-commerce grew 23%, and 24% in the U.S., ahead of expectations. Chief Executive John Furner tied it to fundamentals, saying multi-year e-commerce growth is “evidence that customers are choosing Walmart because we deliver price, speed, and convenience across a broad assortment.” Fair enough.
But the guidance raise is smaller than it looks. Walmart moved the top of its adjusted earnings range by two cents while the Street had been carrying a materially higher number for the year, per Yahoo Finance’s read of the print. Third-quarter guidance calls for net sales growth of 3% to 3.75%, slower than the quarter just reported. Management also flagged just over $2 billion in incremental fuel cost headwinds for the year.
A company raising the year on a legal windfall while guiding the next quarter below the last one is telling you something specific about the American consumer, and it is not that spending accelerated.
Compare it to Home Depot, which beat on $47.9 billion two days earlier and declined to raise its guidance at all with Canadian tariffs about to land. Two of the largest retailers in the country, two quarters that cleared expectations, two very different willingness levels to promise anything about the back half.
The market priced Walmart’s answer at down 6%. It did not dispute the beat. It just declined to pay for the part of the beat that came from a courtroom.