Costco received $184 million in tariff refunds during its fiscal fourth quarter, but instead of keeping most of the windfall as profit, the warehouse retailer says it is using much of it to lower prices.
The total consisted of roughly $174 million in refunded tariffs and $10 million in interest. Costco’s fiscal fourth-quarter results show that the refunds produced a non-recurring earnings benefit of $0.15 per diluted share after part of the money had already been reinvested in member value.
CEO Ron Vachris said Costco cut prices during the second half of the quarter across produce, meat, beverages, home furnishings and hardware.
That turns what looks like an accounting refund into something consumers could actually notice at checkout.
Costco Could Have Much More Money Coming
The $184 million is apparently only part of the story.
CFO Gary Millerchip said the amount represents a little more than one-third of Costco's expected tariff refunds. The company intends to continue putting the majority of future refunds into better pricing for members rather than treating them purely as an earnings boost.
Costco reported fourth-quarter net sales of $93.9 billion, up 11.2% year over year, while net income climbed to $3.0 billion from $2.61 billion.
Comparable sales excluding gasoline and foreign-exchange effects rose 6.7%, showing that Costco was already growing strongly even before the refund benefit.
Costco and Walmart Are Turning Refunds Into a Retail Price Weapon
The more interesting angle is that Costco is not alone.
Walmart has said it plans to use roughly $2.9 billion in tariff refunds to help fund price reductions across thousands of products. Coinpaper recently covered how Walmart is cutting prices while consumer spending remains under pressure.
That creates an unusual competitive dynamic: tariff refunds that could have remained on retailers' income statements are instead becoming ammunition in a price battle for inflation-sensitive shoppers.
The refunds trace back to the Supreme Court's February decision invalidating broad tariffs imposed under the International Emergency Economic Powers Act. Coinpaper previously examined the $175 billion refund question created by that ruling.
For Costco, the strategy also fits its business model. Low prices help protect membership renewal rates and reinforce the value of paying an annual fee to shop there.
Costco's worldwide membership renewal rate stood at 89.8% in the latest quarter, with 84.1 million paid members.
