The largest US retailers have now booked most of the tariff money the Supreme Court handed back to them, and the pattern in the second-quarter filings points to one outcome: by the fiscal fourth-quarter reporting round (roughly February 17 to March 12, 2027), the refunds that were banked rather than spent are likely to reach shareholders as buybacks, not shoppers as lower prices. The clearest test is Target, which booked $994 million of IEEPA refunds, bought back no stock in the first half of 2026 and sits on $5.4 billion of cash with $8.3 billion of unused authorization. The pattern suggests Target announces a resumption of repurchases no later than its early-March 2027 call, Dollar General executes most of the $700 million program it announced on August 27, and none of the seven retailers that kept their refunds launches a broad refund-funded price program. Walmart’s 11,000 rollbacks will likely remain the exception that proves the rule.
In short
- The prediction: by the Q4 FY2026 reporting round (Feb 17 to Mar 12, 2027), Target announces that share repurchases have resumed, Dollar General completes at least $500 million of its $700 million second-half plan, and no member of the “banker” cohort (Target, Home Depot, Lowe’s, TJX, Ross, Dollar General, Best Buy) converts refund money into a company-wide price program.
- Signal 1: Target’s idle balance sheet. $994 million recognized as a reduction of cost of sales in Q2, zero buybacks year to date, $5.4 billion of cash, $8.3 billion of authorization, and full-year operating-margin guidance framed explicitly excluding the refund.
- Signal 2: Dollar General’s playbook. A $0.25 per-share refund benefit in Q2 was followed in the same release by a raised EPS range, unchanged capex of $1.4–1.5 billion and a return to buybacks, “funded with cash on hand”.
- Signal 3: the off-price and home-improvement language. TJX routed $112 million of a $331 million refund to associate bonuses and kept its $2.75–3.0 billion buyback plan; Ross booked $253 million and kept a $2.55 billion program; Lowe’s chief executive said the company wants to “deliver strong profitability for our shareholders” rather than follow “aggressive pricing action”.
- The counter-signals: Walmart’s $2.9 billion into rollbacks, Dollar Tree’s $0.50 per-share third-quarter reinvestment, Burlington’s full $55 million into “sharper values”, Costco’s member-facing price cuts, and a consumer class-action docket (MDL No. 3197) that could make “banking” the refund politically costly.
Why this matters now
The refund cycle has moved from legal event to capital-allocation event. The Supreme Court ruled on February 20, 2026 that tariffs imposed under the International Emergency Economic Powers Act lacked statutory authority, US Customs and Border Protection opened its CAPE refund system on April 20, and by September 11 the agency had accepted roughly $134.7 billion of potential and certified refunds, with about $122 billion sent to Treasury for payment, according to a CBP declaration filed with the Court of International Trade. The third and final phase, covering finally liquidated entries, is scheduled to open on October 6, as this site set out in its CAPE Phase 3 briefing. For the biggest chains, the money has largely arrived.
That timing matters because the second-quarter reporting round (August 18 to September 11) was the first in which retailers had to say, on the record, what they did with the cash. The answers split into two camps. A “reinvestor” camp, led by Walmart, Dollar Tree, Burlington and Costco, is routing refunds into shelf prices. A “banker” camp, led by Target, Home Depot, Lowe’s, TJX, Ross, Dollar General and Best Buy, is recording refunds as a reduction of cost of goods sold, reporting the earnings, and presenting guidance on an “excluding refunds” basis that quietly treats the money as already spent on nothing.
The next four quarters decide which camp was right, and what the banked cash becomes. Retail history offers a fairly consistent answer to that second question. One-time windfalls in US retail have tended to end up as buybacks and special dividends, with a thin layer of one-time bonuses for optics, rather than as permanent price or wage structures. The signals below suggest this cycle is following the precedent, with Target as the swing vote.
Signal 1: Target’s idle balance sheet
Target’s second-quarter release on August 19 is the most revealing document of the round, less for what it announced than for what it left open. The company “recognized $994 million related to International Emergency Economic Powers Act (IEEPA) tariff refunds received during the second quarter of 2026 as a reduction of Cost of Sales,” worth $1.65 per share and about 370 basis points of both gross-margin and operating-margin rate. Comparable sales rose 3.8 percent on 3.6 percent traffic growth, and full-year adjusted EPS guidance moved to $9.90–$10.90 including the refund. The guidance language is precise: operating-margin rate is framed excluding refunds, and the outlook “excludes any potential future tariff refunds.”
Then the capital-return line: “The Company did not repurchase any stock in the second quarter. As of the end of the quarter, the Company had approximately $8.3 billion of remaining capacity under the repurchase program approved by Target’s Board of Directors in August 2021.” The 10-Q for the period ending August 1 confirms zero repurchases year to date, against $251 million in the first half of 2025, with $5.411 billion of cash on the balance sheet and $1.065 billion of dividends paid year to date. Capital spending of $2.4 billion in the first half is running well ahead of last year, driven by remodels and new stores, but that plan was set before the refund arrived.
Read together, those facts describe a company that has taken in nearly $1 billion of unplanned cash, has said nothing about lowering prices with it, has no incremental capex use for it, and has a dormant buyback with more than $8 billion of headroom. The refund is not in the operating outlook, which means it is by definition free cash sitting in the “shareholder” column. Chief executive Michael Fiddelke, in his first year in the seat, has an obvious moment to signal confidence, and the Q3 call in November or the Q4 call in early March are the natural venues. This is the same setup that preceded Walmart’s decision to go the other way, which this site covered when Walmart poured its $2.9 billion into price cuts; the contrast is instructive, because Target’s traffic growth was stronger than Walmart’s in the same quarter without any refund-funded price move.
Signal 2: Dollar General’s playbook
Dollar General’s August 27 release shows what the banker camp’s next step looks like when it is written down. The company estimated “the gross margin benefit of tariff refunds, after related reinvestments, was approximately 81 basis points,” an operating-margin benefit of roughly 66 basis points and an EPS benefit of “approximately $0.25” in the quarter. It “does not anticipate a material impact to its financial results from tariff refunds, after related reinvestments, in the second half of fiscal 2026.” Full-year EPS guidance rose to $7.80–$8.00 from $7.20–$7.45, and the raise explicitly includes the $0.25.
Capital expenditure guidance did not move: still $1.4–1.5 billion for the year, still approximately 4,730 real estate projects. What did move was capital return. In the same release the company said it “intends to repurchase shares under its existing share repurchase program in the second half of the fiscal year,” up to $700 million, “funded with cash on hand,” against $1.4 billion of remaining authorization and a $1.59 billion cash balance. Dollar General had paused repurchases through its 2024–2025 reset; the resumption arrived in the first quarter in which refund cash hit the balance sheet.
The phrase “after related reinvestments” is doing careful work here. Dollar General has not disclosed what the reinvestments were, and the comparable-sales guidance raise (to 2.5–2.9 percent) suggests some value investment is in the numbers.
But the order of operations in the release is the tell: refund booked, guidance raised, capex held, buyback resumed. If the largest small-box retailer in the country treats the windfall this way in the same quarter it lands, the pattern suggests peers with even less price pressure will do the same at their next natural decision point, which for most is the Q4 print. This site’s Dollar General Q2 preview flagged the refund as sitting outside guidance going in; the release brought it inside, and then converted it.
Signal 3: off-price and home-improvement language
The third signal is not one company but a consistent vocabulary across four. TJX, on August 19, disclosed that it “received $331 million for a portion of the IEEPA tariffs it previously paid,” accrued “$112 million in incremental compensation expense” for associate bonuses, and kept the net $219 million in pretax profit, worth $0.14 of EPS. The full-year FY27 repurchase plan stayed at “approximately $2.75 to $3.0 billion,” with $1.4 billion done in the first half. Guidance is presented on both a reported and an “adjusted, excluding refunds” basis, and the third-quarter range still carries roughly $0.06 of further refund benefit.
Ross Stores’ 10-Q for the quarter ended August 1 says the company “recognized a benefit of approximately $253 million related to these tariff recoveries in Cost of goods sold, with substantially all amounts received,” about 405 basis points of gross margin and $0.60 of EPS. The company’s $2.55 billion repurchase program, authorized in March and running through January 2028, still has $1.9 billion available; unrestricted cash stands at $4.3 billion; capex guidance is unchanged at about $1.1 billion. Chief executive Jim Conroy’s characterization on the call, as reported, was that Ross “refrained from raising prices” during the tariff period, which frames the refund as compensation for margin already conceded rather than as money owed to customers now.
Home Depot and Lowe’s complete the set. Home Depot had received “approximately $730 million” by August 2, “the vast majority of expected refunds,” recognized $685 million as a reduction of cost of goods sold, and reaffirmed full-year guidance because roughly 60 basis points of unplanned fuel and energy costs absorbed much of the benefit, per chief financial officer Richard McPhail. Lowe’s booked about $80 million, worth $0.11 of EPS, and chief executive Marvin Ellison said the company wanted to “deliver strong profitability for our shareholders” and would not “follow any aggressive pricing action.” Four companies, four filings, one vocabulary: refunds are margin, not price.
What the pattern suggests
Put the three signals together and the causal chain runs like this. First, the refund has already been recognized in cost of goods sold at every large banker, so the accounting decision is made and cannot be quietly reversed into price without a visible gross-margin give-back in fiscal 2027. Second, every banker has presented guidance that excludes the refund, so the operating model is not counting on the money; that makes it free cash flow by construction.
Third, the only bankers with a stated use for the cash have chosen buybacks (Dollar General) or bonuses plus buybacks (TJX), and none has raised capex guidance on the strength of the refund. The path of least resistance for the remaining cash is the existing repurchase authorization.
The table below lays out the ledger as disclosed through September 11. Amounts are as reported in company filings and releases; where a company gave only a per-share or basis-point figure, the dollar estimate is derived and marked as such.
| Retailer (report date) | Refund booked | Accounting treatment | Stated use | Capital-return signal | Camp |
|---|---|---|---|---|---|
| Walmart (Aug 20) | $2.9bn, “substantially all” received | Included in Q2 operating income (~750bps of adj. growth) | Price: 11,000 rollbacks in Q2 vs 7,200 in Q1 | Ongoing program, no change | Reinvestor |
| Target (Aug 19) | $994m | Reduction of cost of sales; guidance ex-refund | None stated | Zero buybacks YTD, $8.3bn capacity, $5.4bn cash | Banker |
| Home Depot (Aug 18) | $730m received, $685m in COGS | Reduction of COGS; guidance reaffirmed | Absorbed ~60bps of fuel/energy costs | No change | Banker |
| TJX (Aug 19) | $331m gross, $219m net | Reported vs adjusted ex-refund guidance | $112m associate bonuses; rest to profit | $2.75–3.0bn FY buyback plan unchanged | Banker (with bonus) |
| Ross (Aug 20, 10-Q) | $253m | Reduction of COGS, ~405bps GM | None; “refrained from raising prices” earlier | $1.9bn of $2.55bn program available, $4.3bn cash | Banker |
| Dollar General (Aug 27) | ~$0.25 EPS, ~81bps GM net (est. $70–80m) | Net of “related reinvestments”; in raised guidance | Unspecified reinvestment, then profit | Buybacks resumed, up to $700m in H2 | Banker |
| Dollar Tree (Aug 27) | $383m ($369m COGS, $14m other income) | ~650bps op margin in Q2; FY net benefit ~$0.60 | ~$0.70 per share reinvested across H2, $0.50 in Q3 | $605m bought in Q2, $2.5bn remaining | Hybrid |
| Burlington (Aug 27) | $55m | Fully reinvested, 40% Q3 / 60% Q4 | “Sharper values”; Q3 EPS guide $1.60–1.70 | $87m bought in Q2, $218m remaining | Reinvestor |
| Lowe’s (Aug 19) | ~$80m, $0.11 EPS | Reduction of COGS | “Strong profitability for our shareholders” | No change | Banker |
| Best Buy (Aug 27, 10-Q) | $34m in Q2 plus $41m received Sept 2 | Reduction of cost of sales when received | None stated | $37m bought in H1, $3.0bn authorization | Banker |
Two things stand out. The reinvestor column is essentially Walmart plus three companies whose refunds are small relative to their sales, and Walmart’s decision came with the weakest US comparable-sales growth in six years, which limits its persuasive power for peers. The banker column, by contrast, holds roughly $2.4 billion of cash that has no stated use, concentrated at Target. That is the money the prediction is about.
The precedent table adds the historical base rate. In each prior US windfall, the shareholder share of one-time cash was high and the price or wage share was small and front-loaded for publicity.
| Windfall episode | Scale | Where the cash went (as documented) | Read-across to 2026 refunds |
|---|---|---|---|
| 2004 repatriation holiday (American Jobs Creation Act) | Roughly $300bn repatriated in 2005 | Academic studies (Dharmapala, Foley and Forbes) estimated that most of each repatriated dollar flowed to shareholder payouts, despite statutory language directing it to investment | Cash with no operating home migrates to buybacks even when policy intent points elsewhere |
| 2017 tax cut (Tax Cuts and Jobs Act) | Corporate rate cut from 35% to 21% | Retailers announced one-time bonuses and starting-wage increases in early 2018 (Walmart, Target and others), while S&P 500 buybacks set a record above $800bn that year | TJX’s $112m bonus accrual matches the “visible one-time gesture, structural cash to buybacks” template |
| 2021 stimulus-era retail profits | Record margins across general merchandise | Target repurchased about $7 billion of stock in fiscal 2021; Walmart authorized $20bn; buybacks paused only when the 2022 inventory glut hit | Target’s own history shows it uses buybacks as the release valve for excess cash in good years |
| 2026 IEEPA refunds | ~$122bn sent to Treasury for payment by Sept 11 | Split so far: Walmart to price; TJX to bonuses and profit; Dollar General to buybacks; Target, Ross, Home Depot, Lowe’s banked | Likely resolution: Target resumes buybacks by March 2027; price share stays concentrated in Walmart and the clubs |
Wider context: deflation, litigation and the second wave of cash
Three adjacent dynamics shape how this plays out. The first is goods deflation. Walmart’s rollbacks, Costco’s member-facing cuts and Dollar Tree’s second-half reinvestment are pushing core goods prices down at exactly the moment tariff pass-through is lapping, a dynamic this site examined in its call that core goods CPI likely turns negative by the November print. For a banker, deflation cuts both ways: it raises the competitive cost of holding price, but it also means that any price investment now would be chasing a falling market rather than defending share, which is the argument Lowe’s made out loud.
The second dynamic is the second wave of cash. CAPE Phase 3 opens October 6 for finally liquidated entries, plaintiffs only, and importers that never sued remain dependent on the government’s Federal Circuit appeal. For the largest chains this is marginal money; Walmart, Ross, Home Depot and Best Buy have all said they have substantially all they expect.
But Costco had received only about a third of its expected refunds as of late August, according to CFO Dive reporting cited in this site’s Costco preview, and mid-sized importers and brands are only now filing. That means the “what do you do with it” question repeats in November and again in March, and the answer given by the first movers becomes the template.
The third dynamic is the vendor chain. Williams-Sonoma, as reported in a September 14 roundup by the Liberty Justice Center, plans to return about $47 million of a $200 million refund to vendors that had shared tariff costs, and to put roughly $10 million into employee retirement accounts. UPS, FedEx and DHL have said they will pass brokerage-collected IEEPA refunds to customers on a rolling basis. None of this changes the shareholder math at the big-box level, but it does mean the “we kept it” answer will sit next to visible examples of companies that did not, which raises the reputational cost of banking and may push more bankers toward the TJX bonus template as cover.
Implications for retailers, brands and investors
For retailers still deciding, the Dollar General sequence is likely to be the reference case: book the refund, raise the EPS range to include it, leave capex where it was, and restart or extend the buyback in the same breath. Companies that want to avoid the Lowe’s headline (“not going toward price cuts”) have the TJX option of a one-time associate bonus sized at a third of the refund, which reads well and creates no structural cost. The pattern suggests that by March 2027 at least one more banker, most plausibly Home Depot or Best Buy, adds a bonus or benefit gesture to its Q4 release for that reason.
For brands and suppliers, the practical implication is that retailer price pressure from refund money will likely stay concentrated in Walmart, Sam’s Club, Costco, BJ’s and the dollar channel through the holiday season, and will not spread to the department-store, home-improvement or electronics channels. Vendor-negotiation asks in those channels are more likely to reference fuel and freight than tariffs, a shift this site previewed when it argued that fuel and energy likely outrank tariffs in November guidance. Suppliers that received their own refunds should expect retailers in the banker camp to ask for a share only where the supplier explicitly surcharged during 2025.
For investors, the falsifiable piece is Target. A resumption announcement would likely be sized modestly at first (the company’s last active year, fiscal 2022, ran at roughly $2.6 billion), but the signal value is in the restart rather than the size. Dollar General’s execution against “up to $700 million” is the second marker; the 10-K filed in March will show the actual number. And the negative test is just as useful: if any banker announces a broad price program funded by refunds between now and March, the thesis is wrong for that company, and probably for its closest peer.
Caveats: what could go wrong
The strongest counter-signal is that the reinvestor camp could be right on the merits. Walmart’s chief financial officer John David Rainey framed the rollbacks as a share strategy: “We’re investing heavily in price because customers need us to and because we believe it drives market share gains over time.” If Walmart’s third-quarter US comparable sales reaccelerate from 2.6 percent while Target’s slow from 3.8 percent, the market will read that as proof that refund-funded price works, and Target’s board may prefer a value investment over a buyback in March. Burlington’s guide (third-quarter comps of 1 to 3 percent even with 40 percent of the refund deployed) is the early evidence against this, but one quarter of off-price data is not a verdict.
The second risk is legal and political. A consumer multidistrict litigation, MDL No. 3197, In re Amazon Tariff Litigation, was set for a Judicial Panel on Multidistrict Litigation hearing on September 24, and Amazon, Costco, Walmart, Shein and nine other companies have opposed consolidation, as this site reported in its MDL briefing. Costco is also defending the Stockov case in Illinois, which argues that members who paid tariff-inflated prices are owed a share.
A retailer that books nearly $1 billion and then announces a buyback is handing plaintiffs a narrative. That may push Target toward a value gesture, or toward the TJX-style bonus, before any repurchase headline.
The third risk is that the refunds are simply smaller than they look, in which case there is less to allocate. Home Depot’s $685 million was largely eaten by fuel and energy costs and by acquisition mix, and the company reaffirmed rather than raised guidance. If fourth-quarter input costs rise further, the bankers may find that the refund has already been spent on absorbing inflation elsewhere, and the buyback decision gets deferred without any change in philosophy. Finally, replacement tariffs under other statutes could re-impose part of the cost base in 2027, which would make a price investment funded by a refund look like a mistake in hindsight and reinforce the banker position, but could also change the cash-flow math enough to delay capital returns.
Scenarios and how to score them
| Scenario | Rough probability | What it looks like by March 12, 2027 | Leading indicator |
|---|---|---|---|
| Base case: shareholders | ~60% | Target announces repurchases have resumed; Dollar General reports at least $500m of buybacks in H2; no banker launches a refund-funded price program | Target Q3 call (mid-November) language on capital priorities; Dollar General Q3 release (early December) buyback progress |
| Delayed shareholders | ~25% | Bankers hold the cash into fiscal 2027 citing fuel, energy or tariff uncertainty; Target restarts buybacks only after the March call | Home Depot and Lowe’s Q3 input-cost commentary; any change to Target’s leverage targets |
| Price contagion | ~15% | At least one banker (most plausibly Target or Best Buy) announces a company-wide value program explicitly tied to refunds before the holiday season | Walmart Q3 US comp above 3.5%; Target Q3 traffic below 2%; MDL consolidation granted with a consumer-refund theory intact |
The scoring rule is deliberately simple. The prediction is correct if, by March 12, 2027, Target has publicly stated that it resumed repurchases, Dollar General has disclosed second-half buybacks of at least $500 million, and none of the seven named bankers has announced a broad price program attributed to refund money. It is wrong if Target has not resumed, or if any banker converts the refund to price. A partial outcome (Target resumes but Dollar General falls short, or vice versa) counts as partially right and should be recorded that way.
FAQ
What exactly are the IEEPA tariff refunds?
They are repayments of duties collected under the International Emergency Economic Powers Act after the Supreme Court ruled on February 20, 2026 that the statute did not authorize the tariffs. Customs and Border Protection processes them through the CAPE system in phases; by September 11 it had accepted about $134.7 billion of potential and certified refunds, per its filing with the Court of International Trade. The agency’s own IEEPA duty refunds page is the primary reference for eligibility and phase timing.
Why would Target buy back stock instead of cutting prices like Walmart?
Because the two companies face different problems. Walmart’s comparable-sales growth slowed to 2.6 percent in Q2 and its chief financial officer framed price as a share strategy. Target’s comps grew 3.8 percent on 3.6 percent traffic growth without any refund-funded price move, and its guidance already excludes the refund, which leaves the $994 million as unallocated cash against a dormant $8.3 billion authorization. The signals point to the buyback as the path of least resistance, but the November call will show whether the board sees it that way.
Isn’t Dollar General’s buyback just a coincidence of timing?
Possibly, and the release does not link the two explicitly. But the $700 million program was announced in the same document that booked the $0.25 per-share refund benefit, raised the EPS range to include it, held capex flat and said the money would come from cash on hand. The sequence is what the prediction relies on, not a stated causal claim by the company.
Could retailers be forced to pass the refunds to consumers?
There is no federal rule requiring it, and law-firm commentary through the summer has generally concluded that importers of record may keep refunds unless a contract or a state consumer-protection theory says otherwise. The live risk is litigation: the Stockov case against Costco and the proposed MDL against Amazon and others both argue that consumers who paid tariff-inflated prices have a claim. Those cases could take years, but they create a reputational cost for a buyback announcement that follows a large refund.
What is the counter-argument that price investment wins?
That in a deflating goods market, the retailer that cuts first takes traffic and holds it after the refund is gone. Walmart’s rollbacks, Costco’s member-facing cuts and Dollar Tree’s second-half reinvestment all bet on this. The evidence so far is mixed: Walmart’s comps slowed despite the cuts, and Burlington guided third-quarter comps of only 1 to 3 percent while spending its refund. If the November prints show the reinvestors pulling ahead on traffic, the thesis weakens.
Why not expect the cash to go into capex or wages instead?
Because no banker raised capex guidance on the refund, and the only wage-linked use disclosed so far is TJX’s one-time $112 million bonus accrual, sized at about a third of its refund. Capex plans at Target, Dollar General, Ross and TJX were set before the refunds arrived and have not moved. Historical windfalls (the 2004 repatriation holiday and the 2017 tax cut) show the same pattern: one-time gestures on labor, structural cash to shareholders.
Does the second refund wave from October 6 change the picture?
For the largest chains, not much: Walmart, Ross, Home Depot and Best Buy have said they hold substantially all of what they expect. Phase 3 matters more for Costco, which had received only about a third of its expected refunds by late August, and for mid-sized importers and brands. The likely effect is a repeat of the same allocation question in the November and March rounds, with the first movers’ answers acting as the template.
How should a reader check this prediction in March 2027?
Three documents suffice. Target’s fourth-quarter release and 10-K (early March) will state whether any shares were repurchased in the second half of fiscal 2026. Dollar General’s fourth-quarter release and 10-K (mid-to-late March) will show second-half repurchases against the $700 million plan. And a scan of the Q3 and Q4 releases from Home Depot, Lowe’s, TJX, Ross and Best Buy will show whether any announced a refund-funded price program.
If Target resumed, Dollar General reached $500 million and no banker cut price on refund money, the call held.
What would make you change the prediction before March?
Two things. A Walmart third-quarter US comp above roughly 3.5 percent alongside a Target comp below 2 percent would suggest refund-funded price is winning share, and would raise the odds of price contagion. And an MDL consolidation order that keeps a consumer-refund theory alive would raise the political cost of a buyback announcement enough that Target might choose a visible value or bonus gesture first. Either would move the base case from 60 percent toward the delayed-shareholders scenario.