Costco Wholesale told investors on its fourth-quarter earnings call that it collected $184 million in refunded tariffs during the quarter, and that most of the money is being pushed back into shelf prices rather than held on the balance sheet. The disclosure is the clearest evidence yet that the refund wave created by this year’s Supreme Court ruling on emergency tariffs has started to reach consumers.
In short
- $184 million refunded: Costco received $174 million in IEEPA tariff refunds plus $10 million in interest during its fiscal fourth quarter, according to the company’s earnings materials and call.
- Money went to prices: Chief executive Ron Vachris said the company reinvested part of the refund into lower prices on produce, meat, beverages, home furnishings and hardware.
- Only a third has landed: Chief financial officer Gary Millerchip told investors the amount received so far is slightly more than one-third of what Costco expects to collect in its fiscal first quarter.
- The earnings beat carries an asterisk: the refund added $0.15 per diluted share to a reported $6.75, so underlying earnings were closer to $6.60 against a consensus bar near $6.54.
- The backdrop is a $160 billion-plus repayment: importers paid at least $160 billion in IEEPA duties before the Supreme Court struck the program down in February 2026, and estimates of total refunds run to $165 billion or more.
What Costco actually disclosed
Costco reported fourth-quarter and full-year fiscal 2026 results on September 24, 2026. Net sales for the quarter rose 11.2 percent to $93.9 billion from $84.4 billion a year earlier. Net income came in at $2.998 billion, or $6.75 per diluted share, against $2.610 billion and $5.87 per diluted share in the comparable quarter.
Inside those numbers sat a line item the company flagged explicitly. Costco said the quarter was positively affected by a non-recurring benefit of $0.15 per diluted share from IEEPA tariff refunds received during the period, less partial reinvestment of those refunds in increased member values. The phrasing matters: the company is telling investors the gross refund was larger than the earnings benefit because a share of it was spent on prices before it ever reached the bottom line.
On the call, executives put a figure on the gross amount. Costco received $184 million, composed of $174 million in refunded duties and $10 million in interest paid by the government on money it had held. Reuters reported the executive statement from the conference call, and the figure was subsequently carried by Fox Business, Quartz and regional outlets in Costco’s home market of Washington state.
The full-year picture was similarly strong. Net sales for fiscal 2026 increased 10.1 percent to $297.2 billion from $269.9 billion, and net income reached $9.226 billion, or $20.76 per diluted share, up from $8.099 billion and $18.21. Our preview of the Costco Q4 print set the consensus bar at $93.9 billion in sales and $6.54 in earnings per share, which makes the sales line an exact match and the earnings line a beat that deserves unpacking.
The earnings-per-share asterisk
Reported earnings of $6.75 per diluted share cleared the $6.54 consensus by $0.21. The company itself attributed $0.15 of that to the tariff refund, net of reinvestment. Strip the refund out and underlying earnings land near $6.60, a beat of roughly $0.06 rather than $0.21.
That is not a criticism of the quarter, which was robust on its own terms. It is a caution about read-across. Any analyst modelling Costco’s fiscal 2027 margin off a $6.75 base is extrapolating from a number that contains a one-time legal recovery, and the company said as much in plain language.
The arithmetic also reveals how much of the gross refund was spent rather than banked. Costco’s diluted share count implied by $2.998 billion of net income and $6.75 per share is roughly 444 million shares. A $0.15 per-share after-tax benefit across that base is about $67 million. Against a gross refund of $184 million, that implies the large majority of the money went to reinvestment and tax rather than to reported profit.
Why there is a refund at all
The refunds trace back to a single Supreme Court decision. In Learning Resources, Inc. v. Trump, decided February 20, 2026, the Court held 6-3 that the International Emergency Economic Powers Act does not authorize the President to impose tariffs. Chief Justice Roberts joined Justices Sotomayor, Kagan, Gorsuch, Barrett and Jackson in the majority, with Justices Thomas, Kavanaugh and Alito dissenting.
The reasoning turned on statutory text. The majority found that IEEPA’s authority to “regulate importation” does not carry with it the distinct power to tax or raise revenue, which the Constitution assigns to Congress. That holding converted duties already collected into overpayments, and the case was remanded to the Court of International Trade to work out refund procedures.
The sums are unusually large for a tariff dispute. Importers had paid $133.5 billion in IEEPA duties as of December 14, 2025, according to Tax Foundation analysis, which estimates the total reached at least $160 billion by the February ruling date. Had the program survived, it was projected to raise $1.4 trillion between 2026 and 2035.
Estimates of the eventual refund total vary because interest continues to accrue and because not every entry is eligible. Figures cited in trade-advisory commentary run from roughly $165 billion to as high as $175 billion. Those are estimates rather than settled accounting, and the pace of repayment depends on customs processing rather than on the court.
Which tariffs survived
The ruling did not end US tariffs. Section 232 duties on steel, aluminum, autos and heavy trucks remain in force and are projected to raise $635 billion over the next decade. The administration also retains Section 301, Section 122 and Section 338 authorities, and has used them.
That distinction matters for retail cost models. A company whose import bill was concentrated in IEEPA-covered goods is getting money back; a company exposed mainly to Section 232 metals or Section 301 China lines is not. The refund windfall is therefore uneven across the sector, which is part of why disclosed amounts vary so widely.
Which prices Costco cut
Costco was specific about where the money went. Vachris said the company reinvested some of the recovered dollars to give value back to members, and named produce, meat, beverages, home furnishings and hardware as categories that received reductions. These are high-frequency, high-visibility items rather than clearance goods.
Millerchip framed the allocation as a deliberate spreading exercise. “Our goal was to make sure that we spread those as we could to items that would have the most impact for members,” he told investors. The phrasing suggests the cuts were distributed across a basket rather than concentrated in a headline promotion.
The choice of categories is commercially logical. Produce and meat are the traffic drivers in a club format and the categories where members most readily compare prices against supermarkets. Beverages and hardware carry high unit volumes, so a modest per-unit reduction reaches a large number of baskets.
Costco also reminded investors of a separate value lever: the company said it saved members $3.2 billion on gasoline over the fiscal year. Fuel is not a tariff story, but it is part of the same pitch that the club format returns savings rather than banking them. Our analysis of how refund-driven price cuts could push core goods CPI negative examined whether reductions of this kind are large enough to register in national inflation data.
How a refund becomes a shelf price
The path from a customs repayment to a lower price is less direct than it sounds. A tariff refund arrives as a cash payment against duties recorded months or years earlier, by which time the goods have usually been sold and the cost already absorbed into a prior period’s margin. The money is therefore a recovery of historical cost, not a reduction in the current cost of goods.
That accounting reality gives retailers a choice that a straightforward cost decline would not. When an input price falls, competitive pressure tends to force the saving through to shelf prices whether the retailer wants it or not. When a windfall arrives as a legal recovery, nothing compels the company to spend it, which is why deployment has varied so widely across the sector.
Costco’s decision to spend it is best read against its membership economics. The company earns a large share of its profit from annual fees rather than from merchandise margin, which makes perceived value a direct input to renewal rates and to fee income. Cutting prices is, in that model, closer to customer retention spending than to a giveaway.
Nintendo reached a similar destination by a different route. Having absorbed the original duties rather than raising prices, it treated the refund as money that belonged to customers in some sense, and returned it as a broad discount event. Both companies converted a balance-sheet item into a consumer-facing one, which is what makes the refund visible in the economy rather than invisible inside corporate accounts.
Whether refunds influence holiday pricing depends almost entirely on when the cash arrives. Costco’s next tranche is expected during its fiscal first quarter, which overlaps the peak selling season, and Millerchip has said the intention is to reinvest most of it. A retailer that receives its money in that window can fund promotional depth at the moment demand is highest.
A company that receives payment after the holidays faces a different calculation. By then the season’s pricing is set and the cash reads as a balance-sheet improvement rather than a merchandising tool. The same refund produces a materially different consumer outcome depending purely on the processing queue.
This is why the administrative pace at customs has become a commercial variable rather than a compliance footnote. Importers with clean documentation and liquidated entries move earlier in the queue, and earlier money is more useful money. The legal question was settled in February; the economic question is being settled by processing throughput.
How Costco compares with other refund recipients
Costco is not the first retailer to book an IEEPA refund, but it is among the largest to date and the most explicit about routing the money to prices. The disclosed figures across the sector now allow a rough comparison of both size and deployment.
| Company | Disclosed IEEPA refund | Period disclosed | Stated use of funds |
|---|---|---|---|
| Nintendo | About $300 million | Q1 fiscal 2027 | Booked as a cost-of-sales reduction; funded a roughly 30 percent discount sale |
| Costco Wholesale | $184 million ($174m duties, $10m interest) | Q4 fiscal 2026 | Partial reinvestment into produce, meat, beverages, home furnishings, hardware |
| Burlington Stores | $55 million | Q2 fiscal 2026 | Directed to prices; quarterly guidance still missed |
| Dillard’s | $37.2 million | Q2 fiscal 2026 | Booked to profit; quarterly earnings rose 34 percent |
The spread in deployment is the interesting part. Dillard’s let the refund flow to reported profit, while Burlington put its $55 million into prices and still missed its guidance. Nintendo took the most consumer-facing route, explicitly telling customers that a large promotion was funded in part by money recovered from the US government.
Nintendo’s case is instructive because the company said it had largely absorbed the original tariff costs rather than passing them through in higher prices. That framing turns the refund into a rebate to customers who never paid a surcharge, delivered as a general markdown rather than targeted compensation. Costco’s approach sits between the two poles: a genuine price reinvestment, but one sized so that a meaningful portion still reached earnings.
The September 29 import ban complicates the Canadian picture
Costco’s Canadian comparable sales grew 5.0 percent in the quarter, well behind the 10.7 percent recorded in the United States. The company did not link that gap to trade policy, and exchange-rate movements affect reported comparable sales, so the figure should not be read as a direct policy effect. The trading environment between the two countries, however, is about to change again.
On September 29, 2026, a set of US import bans on specified Canadian goods takes effect. The measures were established by five presidential proclamations signed on September 8, and they rest on Section 338 of the Tariff Act of 1930, a rarely used provision that permits action against countries found to discriminate against US commerce.
The structure is escalatory. Section 338 allows duties of up to 50 percent where discrimination is found, and permits outright exclusion if the discrimination continues. A 50 percent additional duty on Canadian dairy, alcoholic beverages and motor vehicles took effect on August 22, and the September 29 measures replace tariffs with bans for certain products across those three sectors.
What the ban covers and what it exempts
The covered list runs across dairy products, a broad range of alcoholic beverages including malt beer, wines, cider, whiskies and vodka, non-alcoholic beer, whey products and molasses, and larger-capacity motorcycles and mopeds. A modification effective September 15 added 122 classifications and removed 10, including rock salt, cement and fishing rods, which illustrates how fluid the scope has been.
Several carve-outs apply. Energy products, potash, goods already covered by Section 232 and WTO civil aircraft are excluded from the measures. Notably, USMCA origin does not exempt covered goods from either the duty or the ban, which removes the mitigation route many North American importers would ordinarily use.
There is also a transition provision that matters for inventory planning. Goods imported but not formally entered before September 29 remain subject to the existing 50 percent duty rather than falling under the ban, which gives importers holding stock in transit a narrow and expensive path to clearance.
For grocers and club retailers on both sides of the border, the practical effect is assortment risk in specific categories rather than a broad cost shock. Alcohol and dairy are high-turn categories with established Canadian supply lines into US stores, and a ban removes the option of paying a duty to keep the item on the shelf. The contrast with the IEEPA story is stark: one trade action is returning money to retailers while another is removing products from their assortment.
What the refund pipeline looks like from here
The most consequential line from the call was not the $184 million. It was Millerchip’s statement that the amount received represents slightly more than one-third of what the company expects to collect in its fiscal first quarter. If that guidance holds, a substantially larger tranche is due in the current period.
That points to a second, larger reinvestment decision within months rather than years. Millerchip also indicated the company intends to keep directing most of those funds back into lower prices, which sets a public expectation the company will be measured against at its next report.
The customs processing queue
Repayment speed is an administrative question, not a legal one. Customs and Border Protection has been working through eligible entries in phases, prioritizing liquidated entries and working backward through the queue. Our reporting on the CBP refund schedule and its October 6 phase covers how the agency is sequencing payments and which importers are positioned earliest.
For large importers with in-house customs teams, the process is largely mechanical. For smaller retailers relying on brokers, the administrative burden of documenting eligible entries can exceed the recovery on low-value shipments. The result is that the refund wave is concentrating in the hands of scale importers, which compounds the competitive asymmetry.
Costco’s quarter in figures
| Metric | Q4 fiscal 2026 | Q4 fiscal 2025 | Change |
|---|---|---|---|
| Net sales | $93.9 billion | $84.4 billion | +11.2% |
| Net income | $2.998 billion | $2.610 billion | +14.9% |
| Diluted earnings per share | $6.75 | $5.87 | +15.0% |
| Comparable sales, total | +9.4% | n/a | n/a |
| Comparable sales, United States | +10.7% | n/a | n/a |
| Comparable sales, Canada | +5.0% | n/a | n/a |
| Comparable sales, other international | +7.0% | n/a | n/a |
| Digitally-enabled comparable sales | +19.5% | n/a | n/a |
| IEEPA refund benefit per diluted share | $0.15 | None | Non-recurring |
The regional split is worth noting alongside the tariff story. US comparable sales grew 10.7 percent while Canada managed 5.0 percent, a gap that coincides with a period of active trade friction between the two countries. Costco did not attribute the Canadian figure to trade policy, and currency movements affect reported comparable sales, so the association should be treated as context rather than cause.
Why the buyback thesis is now under pressure
Before this quarter, the reasonable expectation was that refund windfalls would end up in share repurchases. That is the default use of non-recurring cash for a large-cap retailer with no financing need, and several companies had signalled as much. We argued that case in our analysis of why the tariff-refund windfall was likely to end in buybacks rather than price cuts.
Costco’s disclosure complicates that thesis without demolishing it. Roughly $67 million of a $184 million gross refund appears to have reached reported profit, with the balance absorbed by reinvestment and tax. That is a real reinvestment, and management has committed publicly to repeating it with a larger tranche.
Two caveats apply. Costco is an unusual company: its membership model makes returning value to members a direct driver of renewal rates and fee income, so price reinvestment is closer to marketing spend than to charity. A department store or a specialty chain has no equivalent mechanism, which is why Dillard’s behaved differently.
The second caveat is durability. A price cut funded by a one-time refund is only sustainable while refunds continue. When the pipeline empties, either the prices rise again or the margin absorbs the difference, and neither outcome is comfortable to disclose.
Why the membership model changes the calculation
The buyback logic assumes a retailer whose shareholders are the natural claimant on surplus cash. Costco’s structure blurs that assumption because members are a recurring revenue base whose renewal behavior responds to perceived value. Money spent narrowing prices on produce and meat is money spent defending fee income.
That makes Costco a poor template for the rest of the sector. A department store recovering a refund has no membership renewal to protect and faces shareholders with a clearer claim, which is the straightforward explanation for why Dillard’s booked its recovery to profit and Costco did not.
The useful test will therefore come from retailers with similar subscription or membership dynamics rather than from retail broadly. If membership-led competitors deploy their refunds into prices while conventional chains book theirs, the split will confirm that deployment is driven by business model rather than by public pressure or policy intent.
What it means for competing grocers and club retailers
Costco’s reinvestment sets a competitive marker in categories where price comparison is easiest. Produce and meat are precisely the areas where supermarkets track club pricing most closely, and a funded reduction in those categories pressures rivals who did not receive comparable refunds.
The asymmetry is the point. A grocer sourcing predominantly domestic fresh product paid little IEEPA duty and therefore receives little back, yet it faces the same shelf prices from a competitor that did. That is a margin problem created by trade litigation rather than by merchandising.
For the club channel specifically, the reinvestment lands during a period of strong underlying traffic. With total comparable sales up 9.4 percent and digitally-enabled comparable sales up 19.5 percent in the quarter, Costco is cutting prices from a position of strength rather than defending share.
Refund eligibility depends on where goods were sourced and under which authority they were dutied. Retailers that had begun shifting sourcing away from IEEPA-covered origins in 2025 may find they reduced their own refund entitlement, an outcome few would have modelled at the time.
That creates an awkward incentive review. Sourcing teams that moved fastest to mitigate tariffs are now recovering least, while those that absorbed the duties and held their supply base are receiving the largest repayments. The lesson is not that mitigation was wrong, but that legal risk on a tariff program is a variable worth pricing.
What to watch next
Three dates and disclosures will determine whether the Costco pattern becomes a sector norm. The first is Costco’s fiscal first-quarter report, when the larger refund tranche Millerchip described should appear and the company will have to show whether it honored its stated intention to reinvest most of it.
The second is the pace of customs processing through the autumn, which determines how much cash reaches retailers before the holiday quarter. A refund that lands in November is a promotional weapon; one that lands in February is a balance-sheet item.
The third is the disclosure behavior of other large importers in the current earnings cycle. If several follow Costco in naming both the amount and the categories that received cuts, the refund becomes a visible consumer-price event. If most follow Dillard’s and simply book it, the money stays with shareholders and the inflation effect stays theoretical.
For readers tracking the underlying figures, Costco publishes its quarterly results and supporting detail through its investor relations news page.
Frequently asked questions
How much did Costco receive in tariff refunds?
Costco received $184 million during its fiscal fourth quarter of 2026, consisting of $174 million in refunded duties and $10 million in interest paid by the government. The figure was disclosed on the company’s earnings call on September 24, 2026.
Why is the US government refunding tariffs?
In February 2026 the Supreme Court held 6-3 in Learning Resources, Inc. v. Trump that the International Emergency Economic Powers Act does not give the President authority to impose tariffs. Duties collected under that authority became overpayments, and the case was sent back to the Court of International Trade to establish refund procedures.
Which Costco prices were reduced?
Chief executive Ron Vachris named produce, meat, beverages, home furnishings and hardware as the categories that received reductions. The company did not publish a list of individual items or the size of each cut.
Did the tariff refund cause Costco’s earnings beat?
It accounted for most of it. Costco reported $6.75 per diluted share against a consensus near $6.54, and attributed $0.15 per share to the refund, net of reinvestment. Excluding that benefit, underlying earnings were closer to $6.60.
How much more does Costco expect to receive?
Chief financial officer Gary Millerchip said the amount received so far is slightly more than one-third of what the company expects to collect in its fiscal first quarter. That implies a materially larger tranche in the current period, though the company did not give a precise figure.
Are all US tariffs being refunded?
No. Only duties collected under IEEPA are affected. Section 232 tariffs on steel, aluminum, autos and heavy trucks remain in force, and the administration retains Section 301, Section 122 and Section 338 authorities, several of which it has used.
How large is the total refund pool?
Importers had paid $133.5 billion in IEEPA duties as of December 2025, and analysis by the Tax Foundation estimates the total reached at least $160 billion by the February 2026 ruling. Estimates of eventual refunds, including accrued interest, range from roughly $165 billion to $175 billion.
Have other retailers passed refunds to customers?
Yes, though inconsistently. Burlington directed $55 million to prices, and Nintendo booked roughly $300 million as a cost-of-sales reduction and funded a large discount event with it. Dillard’s, by contrast, let its $37.2 million flow to reported profit.
Will these price cuts be permanent?
That is unresolved. The reductions are funded by non-recurring refunds, so maintaining them once the pipeline empties would require absorbing the cost in margin. Costco has committed to reinvesting most of the next tranche but has not addressed what happens after refunds stop.