Wednesday morning delivered three retail earnings reports inside two hours, and all three of them had the same asterisk attached: a check from the U.S. government.
Target posted second-quarter earnings per share of $4.11, exactly double the $2.05 it earned a year ago. Comparable sales grew 3.8% against Wall Street's 2.4% estimate. Net sales climbed 5.3%. The company raised its full-year sales growth guidance by a full percentage point and lifted its earnings range. The stock closed at $159.08, up 4.33% on the day, and is up more than 55% this year.
Then you read the footnote. Of that $4.11 in earnings, $1.65 came from tariff refunds — $994 million of pretax benefit sitting inside gross margin, $752 million of it landing in net earnings. Strip it out and EPS grew 20%, not 100%.
That is still a good quarter. It is not the quarter the headline number describes.
The Same Check, Three Different Stories
Lowe's reported the same morning. Total sales of $26.0 billion against roughly $26.15 billion expected — a miss. Comparable sales grew 0.2% versus the 0.5% analysts wanted, though it was the fifth consecutive quarter of positive comps. Adjusted EPS of $4.40 beat the $4.22–$4.23 consensus, and $0.11 of that came from the same IEEPA tariff refunds.
Then Lowe's cut its full-year outlook to the low end of every range it had given: sales of $92.0 billion instead of $92.0–$94.0 billion, comparable sales flat instead of flat to up 2%, adjusted EPS of about $12.25 instead of $12.25–$12.75 against a $12.43 consensus.
CEO Marvin Ellison's explanation was specific about where the weakness sits: "Sustained growth in Pro, Online and Home Services led to our fifth consecutive quarter of positive comp sales, despite pressure in discretionary DIY spending." Online sales rose 15.7%. The professional contractor is spending. The homeowner deciding whether to redo a bathroom is not.
The stock rose anyway — Lowe's closed at $220.66, up 2.33%.
TJX was the third report, and the most interesting one. Comparable sales up 4%, net sales of $15.2 billion, diluted EPS of $1.36 versus $1.10 a year ago. It received $331 million of IEEPA refunds for a $219 million net pretax benefit, worth $0.14 per share; excluding that, adjusted EPS was $1.22, up 11%. It raised full-year guidance to $5.31–$5.36 and announced it will accelerate store growth to 4% a year starting in fiscal 2028, lifting its long-term global store target to 7,500 from the 5,285 it operates now.
TJX beat on every line, raised guidance, and the stock fell 4.15% to $144.59.
Where That Money Actually Came From
The refunds are not a one-time accounting quirk invented by retail CFOs — they are the 800-pound gorilla nobody is talking about in this earnings season. In February, the Supreme Court struck down the IEEPA tariffs. Customs and Border Protection has since paid out $100 billion in refunds as of July 31, out of $128.68 billion accepted through its dedicated portal.
Companies are handling that windfall in visibly different ways. Amazon reported $600 million in reimbursements and, along with Costco, indicated it would push some of it back to customers. Walmart, BJ's Wholesale and E.l.f. Beauty said they would use the money to lower prices. American Eagle Outfitters and The Children's Place did something different again — they sold their rights to the refunds outright for immediate cash.
The legal fight is not finished. The Justice Department is appealing a Court of International Trade order that would require CBP to include all entries in the refund pool, arguing the court lacks jurisdiction over finally liquidated entries. Additional suits have been filed against the expired Section 122 tariffs and the newer Section 301 forced-labor levies.
Which means that for one or two quarters, a meaningful slice of American retail earnings is being paid for by a court ruling rather than by shoppers. That distinction matters most when you are trying to figure out what the consumer is actually doing.
What the Consumer Is Actually Doing
The evidence underneath the refunds is genuinely split.
Target: comparable traffic up 3.6% — more visits, not just higher tickets. Store comps up 2.7%, digital comps up 8.7%, same-day delivery up more than 25%. CEO Michael Fiddelke said the company has cut prices on more than 10,000 frequently purchased items in the past year.
Home Depot, reporting Tuesday: comps up 1.7%, the best since fiscal Q3 2022, on sales of $47.86 billion — while CFO Richard McPhail described "frozen housing market conditions."
Lowe's: DIY discretionary spending under "persistent macro pressure," full-year guidance cut.
TJX: off-price comps up 4%, with international and HomeGoods both up 7%.
The macro data: July retail sales fell 0.6% to $763.6 billion, the first decline in nine months. July payrolls came in at negative 23,000. Consumer sentiment dropped to 51.0 in August's preliminary reading from 55.2.
Read together, the pattern is not "the consumer is strong" or "the consumer is breaking." It is that shoppers are still showing up, and showing up more often, but they are showing up where the value proposition is loudest — off-price, same-day delivery, 10,000 price cuts, the professional contractor's supply run. What is missing is the discretionary upgrade.
The Fed Watched This and Talked About Hiking
Wednesday afternoon the July FOMC minutes landed, and they were more hawkish than the 9–3 hold suggested. Three regional presidents — Hammack, Kashkari and Logan — wanted a 25-basis-point increase, and the minutes said "several participants" favored one. Some argued that moving in July "would likely help forestall the need for a steeper and potentially more costly sequence of tightening moves at a later stage."
Rates stayed at 3.50%–3.75%, with the minutes calling the outlook "highly uncertain" and risks to inflation tilted to the upside.
Bond markets did the opposite of what that message implies, because Treasury doubled its planned buybacks of older 10- to 30-year debt. The 30-year yield, which hit 5.33% on Tuesday — its highest since June 2007 — fell back to 5.19% by Wednesday's close. The 10-year finished at 4.65%. The two-year barely moved, at 4.19%.
Stocks took the reprieve. The S&P 500 closed at 7,710.70, up 0.25%, snapping a three-session slide that began after the record 7,798.99 close on August 13. The Dow added about 0.2% to roughly 53,434, the Nasdaq inched up about 0.1% to near 26,320, and the Russell 2000 outperformed at 3,032.02, up about 0.5%.
Oil kept climbing. Brent settled at $91.62 and West Texas Intermediate at $85.83, both the highest since July 24 and a fourth straight session of gains, after the UAE suspended financial and economic transactions with Iran and traffic through the Strait of Hormuz stayed slow.
What Lands Next
Walmart reports Thursday morning before the open, and as we noted earlier this week, Wall Street's estimate sits almost exactly on top of the company's own guidance. Consensus is roughly $0.74 in adjusted earnings on $186.3–$186.9 billion of revenue, against management's own guidance of $0.72–$0.74 and net sales growth of 4–5%. In the April quarter, U.S. comparable sales rose 4.1% with transactions up 3.0% and ticket up only 1.1% — traffic-led, which is the healthier version. Advertising grew 37% globally and membership fees 17.4%, and those high-margin businesses are increasingly what moves the operating line. Walmart closed Wednesday at $114.30, down 0.78%.
Walmart has already said it will use its tariff refunds to lower prices rather than bank them. So Thursday's report is the cleanest read of the four: if the numbers hold up without a court-ordered check propping up the margin line, the consumer is doing better than the retail sales data suggests. If they don't, then this week's earnings season was a story about Washington, not about shoppers.
Jackson Hole starts August 27. And in a week when the market's attention has been split between a delayed model release out of OpenAI and a 19-year high in long bond yields, the least glamorous question on the tape is still the one that matters: who is actually paying for retail's earnings beat.
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