Walmart (WMT) stock dropped more than 9% in early trading Thursday after the retail giant reported its slowest US store sales growth in six years, even as quarterly profit was lifted by a record $2.9 billion tariff refund that the company says it will direct into price cuts for shoppers.

US comparable sales rose just 2.6% in the second quarter, down from 4.6% in the year-ago quarter and 4.1% in the first quarter of this year. It was the weakest reading since the February-through-April period of 2020. The figure carries weight beyond Walmart's own results: as the largest US retailer and the country's biggest private employer, Walmart is widely treated as a bellwether for consumer spending.

Net income for the quarter ended July 31 came in at $6.4 billion, a figure helped in large part by the $2.9 billion tariff refund — the largest refund reported by any company so far under the program.

Softer Consumer Environment

Higher gas prices are taking a toll on how much consumers have left to spend at the checkout. Chief Financial Officer John David Rainey said Thursday that there is "arguably a softer consumer environment than in February," before fuel costs climbed.

"When gas prices get over $4 a gallon, there's a psychological impact to that," Rainey said on the earnings call. "There are choices that consumers are making."

The slowdown in store sales is also tied to lower drug pricing for GLP-1 weight loss medications, a category that had previously helped lift pharmacy sales, along with more customers choosing to shop online rather than in stores.

Tariff Refunds Fund Price Cuts

Walmart said it has received "substantially all" of the $2.9 billion it was eligible for under the tariff refund program, and the company is directing that money toward price cuts on groceries and general merchandise.

"We're investing heavily in price because customers need us to and because we believe it drives market share gains over time," Rainey said.

Walmart delivered 11,000 rollbacks — temporary price cuts — in the second quarter, up from 7,200 in the first quarter, as it pushes to attract budget-conscious shoppers. In July, the retailer had already cut prices on items including beef, Coca-Cola, and laundry detergent.

The tariff refunds stem from the Supreme Court's February ruling that struck down tariffs the Trump administration imposed under the International Emergency Economic Powers Act (IEEPA). The government began issuing refunds in May from the $168 billion collected from 330,000 importers. As of July 31, around $100 billion had been sent out, according to a court filing by US Customs and Border Protection, leaving roughly $68 billion of the collected total still to be returned to importers.

How Walmart Compares to Other Retailers

Walmart is not alone in receiving a large refund. Target reported $994 million, Home Depot logged $730 million, TJX received $331 million, and Lowe's got $80 million — a combined total that Walmart's $2.9 billion exceeds on its own. Apple, Nike, Amazon, and FedEx have also reported refunds in their most recent earnings results.

Operating income at Walmart rose nearly 30% compared with the same quarter last year, a boost the company tied partly to the tariff refund windfall. Because the refunds draw on a fixed pool of tariffs already collected, the payout is a one-time boost to profit rather than a recurring source of earnings. The refund also underpinned the quarter's $6.4 billion net income.

Retail analyst Neil Saunders of GlobalData Retail said Walmart is likely to focus its tariff savings on essential items as it seeks to hold its position as an everyday low-price retailer. "Wider investments will include things like improved stores," he added.

Walmart's second quarter, ended July 31, thus paired the slowest US comparable sales growth in six years with a $6.4 billion net income figure, a nearly 30% jump in operating income, and the largest corporate tariff refund reported to date — money the retailer says is now flowing into lower prices on groceries and general merchandise.