Home Depot’s $730 million tariff refund was largely offset by rising costs
Home Depot, Amazon, and Walmart are taking very different approaches to the tariff refunds flowing back to retailers.
In a recent earnings call, Home Depot disclosed a $730 million tariff refund, but the windfall was largely offset by rising costs. According to CFO Richard McPhail, $685 million of the refund related to inventory already sold, yielding a 145 basis point gross margin benefit. However, an additional $45 million remains in inventory, and will flow through upon sale.
The net year-over-year gross margin improvement was trimmed by 60 basis points due to unplanned cost inflation, and another 60 basis points due to acquisition-related mix, leaving a net benefit of only 25 basis points. The company folded the refund into its reaffirmed outlook and plans to use it defensively to absorb cost inflation rather than cut prices.
Home Depot's retail sales and comparable-store growth surpassed expectations in Q2, but cautious consumers and rising costs kept the recovery uneven.
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