Target receives nearly $1B in tariff refunds, plans to lower prices

Target recorded $994 million in pre-tax tariff refunds during its fiscal second quarter, according to its earnings report released Wednesday. The windfall helped lift operating income 94% year over year to roughly $2.6 billion, or 9.6% of sales.

The company said the refunds also improved its full-year operating income margin rate by about 90 basis points, bringing it to approximately 6%.

Chief financial officer Jim Lee said Tuesday, ahead of the earnings release, that the retailer plans to funnel the benefit into price reductions. “We have, and we will continue to, invest in price to ensure our guests are getting tremendous value each and every time they visit us at Target,” Lee said. He noted that the company has cut prices on more than 10,000 items over the past year, with more reductions planned despite cost headwinds.

Target executives did not indicate any direct refunds to consumers. The approach mirrors other big-box retailers: Walmart CFO John David Rainey said in May that the company would invest tariff refund proceeds into lowering prices, and BJ’s Wholesale Club CEO Bob Eddy said in June that it used the funds to reduce retail prices by about half a percentage point.

Lee also credited the pricing strategy with driving strong traffic growth this year, saying shoppers are responding to the value being offered.