Home Depot’s $730 million tariff refund was largely offset by rising costs

Good morning. One of the more interesting threads from recent earnings calls: companies are handling tariff refunds very differently, and the amounts involved are substantial.

The refunds stem from a February Supreme Court ruling that forced Customs and Border Protection to start returning duties collected under a since-struck-down law. That money is now showing up on the books of big companies like Home Depot, Amazon and Walmart, each with its own approach.

The retailer collected $730 million in IEEPA tariff refunds in a single quarter, arriving in a lump sum near the end of June. CFO Richard McPhail said on Tuesday’s Q2 call that $685 million of that related to inventory already sold, cutting cost of goods sold immediately and producing a 145 basis point gross margin benefit. The remaining $45 million is still sitting in inventory and will flow through as that inventory sells.

That 145-basis-point benefit got trimmed by 60 basis points of unplanned cost inflation, leaving 85 basis points. A separate 60-basis-point drag from acquisition-related mix brought the net year-over-year gross margin improvement down to 25 basis points.

Billy Bastek, EVP of merchandising, pointed to resin, metals, fuel and energy costs that weren’t in Home Depot’s original 2026 plan, plus a shifting trade landscape: the prior tariff regime expired in July and was replaced by a new Section 301 regime targeting imports tied to forced labor. Home Depot folded the refund into its reaffirmed outlook and is using it defensively, to absorb cost inflation rather than cut prices.The retailer beat expectations in Q2 as sales and comparable-store growth picked up, but cautious consumers and rising costs kept the recovery uneven.

Meanwhile, Amazon CFO Brian Olsavsky disclosed roughly $600 million in Q2 tariff refunds on the July 30 call, calling it “the significant majority” of what Amazon expects to receive overall. Paired with a separate $600........

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