Costco Directs $184 Million in Tariff Refunds to Lower Prices
The warehouse retailer says a second $184 million payment arrived in its current fiscal first quarter.
Costco Wholesale Corp. is using tariff refunds from the U.S. government to cut prices on groceries, household goods and hardware, rather than absorbing most of the money into operating margin. The company received $184 million in reimbursements during its fiscal fourth quarter and expects total payments to exceed $500 million.
The initial payment included $174 million in returned duties and $10 million in federal interest. Costco Chief Financial Officer Gary Millerchip said the company had received an equivalent sum in the current fiscal first quarter. The first $184 million represents slightly more than one-third of the total compensation Costco projects it will recover.
The price cuts began in the second half of the fourth quarter, Chief Executive Officer Ron Vachris said on the company’s earnings call. They covered high-volume goods, including meat, fresh produce and beverages, as well as imported nonfood items such as home furnishings and hardware.
The refunds follow federal court decisions and a subsequent Supreme Court ruling that found emergency trade actions exceeded executive statutory authority. The government was ordered to process an estimated $166 billion in duty refunds, plus statutory interest, for affected domestic importers. The duties had been imposed under the International Emergency Economic Powers Act (IEEPA).
Their rollout disrupted retail supply lines nationwide and forced importers to realign sourcing operations. Costco faced significant inventory strain across its catalog early in the tariff rollout, Vachris said. During the first two quarters of that fiscal year, the company dropped select products and adjusted stock-keeping units (SKUs); warehouse inventory had normalized by the third quarter.
Costco’s approach resembles plans at other large chains. Walmart has confirmed it will direct billions of dollars in government duty reimbursements into price stabilization programs. Costco’s low-margin retail structure caps merchandise markups at approximately 14 to 15 percent, while annual membership fees generate the bulk of its net income. The model routinely routes unbudgeted supply-chain savings into lower unit prices.
Millerchip said Costco will continue to break out the net financial impact of the payments and related price reductions on quarterly financial calls as additional tranches arrive throughout fiscal 2027. The company’s shares rose 2.85% after the quarterly disclosures, gaining $25.51 to close at $921.99.
