Tariff Refund Falls Short for Home Depot Amid Rising Costs

Home Depot's $730 million tariff refund was largely offset by rising costs in its second-quarter earnings. The retailer collected this amount after a February Supreme Court ruling forced Customs and Border Protection to return duties collected under a since-struck-down law.

CFO Richard McPhail said that $685 million of the refund related to inventory already sold, cutting cost of goods sold immediately and producing a 145 basis point gross margin benefit. However, this benefit was trimmed by 60 basis points of unplanned cost inflation, leaving 85 basis points.

The remaining $45 million is still sitting in inventory and will flow through as that inventory sells. Home Depot folded the refund into its reaffirmed outlook and is using it defensively to absorb cost inflation rather than cut prices.