Tariff refunds made fashion retail’s Q2 look huge. Did they fix the business—or just decorate the scoreboard? New to this story? Here’s where we are. Retailers are deciding how federal refunds flow through—to shoppers, prices and margins. Target got $994 million in pre-tax refunds and said it would keep investing in lower prices. Ross Stores later reported roughly $253 million in IEEPA refunds, adding about $0.60 a share and 405 basis points of Q2 margin expansion. You’re listening to Fashion Business Daily. Tariff refunds are lifting results at ANF, Urban and Burlington. The expensive question: who’s keeping the relief? Abercrombie & Fitch Co. writes:
•Record second quarter net sales of $1.3 billion, up 5% to last year, 15th consecutive quarter of growth •Net sales growth across regions with Americas up 5%, APAC up 19%, and EMEA up 2% •Best-ever second quarter sales across brands, led by Abercrombie brands up 8%, with Hollister up 2%
ANF put the refund in its 8-K: roughly $100 million pre-tax, or $1.75 a share. Reported EPS was $4.17, so a big piece of that headline came from the refund, not operations. The clothes did not suddenly get $100 million better. But sales did rise 5% to $1.3 billion, and Abercrombie brands grew 8%, so there is an actual business underneath the accounting confetti. And the company says its 20% operating margin and $4.17 EPS exceeded outlook even excluding the refund. That makes the core quarter look stronger. But to judge the quarter, start with the refund table, not the word “record.” Hollister at 2% versus Abercrombie at 8% is the less flattering split. The grown-up brand has the heat; the youth-facing side is moving, just nowhere near the same speed. Stock Titan writes:
URBAN OUTFITTERS, INC. (URBN) reported record results for the quarter ended July 31, 2026, with net income of $240.7 million and diluted EPS of $2.78. Total Company net sales rose 10.4% to $1.66 billion, marking the eighth consecutive quarter of record sales and profits.
URBN did $1.66 billion in sales, up 10.4%. FP Group rose 10%, and Urban Outfitters grew 8.4%. Nuuly subscribers rose 30.4%, a real customer signal rather than an accounting event. But look past the headline. The company-reported GAAP EPS was $2.78; adjusted EPS was $1.72 after removing the $95.7 million IEEPA tariff-refund benefit and related tax effects. That gap is enormous. A 580-basis-point gross-margin jump to 43.4% looks gorgeous until you see adjusted gross margin was roughly flat. A tariff refund didn’t make the clothes more desirable. The underlying quarter still looks solid: retail comps rose 6.2%, and Stock Titan notes this is URBN's eighth consecutive quarter of record sales and profits. The filing points to a strong operating story, though the $240.7 million GAAP net-income number alone doesn’t give you a clean read. From Stock Titan:
The company ended the quarter with $704 million in cash, total liquidity of $1.65 billion, and total debt of $1.91 billion. Management raised full-year Fiscal 2026 guidance to total sales growth of 10%–11%, comp growth of 3%–4%, Adjusted EBIT margin expansion of 20–40 bps, and Adjusted EPS of $11.77–$11.97, up from $10.17 in Fiscal 2025.
Burlington reported $3 billion in Q2 revenue, up 11%, but the comp was only 2%. The $2.88 EPS headline is far more exciting than the traffic and basket trends. And $55 million of tariff refunds helped push gross margin to 46.2%. Off-price wins when the rack has stuff people actually want at a price that feels like a steal. A federal rebate on a spreadsheet doesn’t change that. There’s more in Burlington’s filing than the raw EPS suggests. Excluding tariff refunds and bankruptcy-lease expenses, company-reported adjusted EPS grew 38%. But management's Q3 guide is $1.60 to $1.70, below last year's $1.80, so they clearly aren’t treating this quarter’s profit rate as the clean run rate. Exactly. They raised full-year adjusted EPS guidance to $11.77 to $11.97, then immediately showed you the softer Q3. That feels more like money going back into inventory and value than a victory lap. If retailers are getting tariff money back but aren’t broadly cutting shelf prices, is it just a margin windfall? Or can they credibly say the refunds are repairing damage already absorbed elsewhere in the P&L? It’ll vary by retailer, and the earnings disclosures matter more than the headline refund total. Forbes reports that major U.S. retailers disclosed more than $5 billion in federal tariff refunds in a single week of earnings, while consumers were still unlikely to receive much direct relief. Refunds can restore gross margin: Federal Reserve research found tariffs had already put upward pressure on retail prices in 2025, and Econofact says online prices at five major retailers began rising after broader tariff measures were announced and kept increasing gradually. They can also offset costs that weren’t fully passed through, including earlier merchandise-cost pressure, rather than create entirely new profitability. Supply Chain Dive reports that Walmart is putting its $2.9 billion return toward price cuts, while other retailers’ plans vary. Coresight Research says the impact on margins and forward guidance is split across retailers and brands. Management can frame the same dollar as recovered margin, a price investment, or room to buy inventory and compete more aggressively. What would tell us whether that “flexibility” is actually reaching customers or just staying in the income statement? Match refund amounts against gross-margin movement and guidance. If margins jump without matching price actions or added operating investment, more of the benefit is probably being retained. When companies say they’ll cut prices, check sales trends and inventory commitments—and whether earnings guidance holds or rises despite those cuts. Walmart’s stated use of refunds for price cuts makes it a particularly useful test case. Here's Sungmin Park at Top Daily:
Lotte Shopping is raising expectations for full-scale earnings improvement by overcoming the shock of one-time costs and proving the competitiveness of its core business. Following the department store division's solid performance driven by an increase in foreign tourists and a recovery in domestic demand, the discount store (mart) division is also emerging as another pillar of earnings improvement in the second half of the year, benefiting from the restructuring of the competitive landscape.
Lotte’s recovery looks cleaner than the tariff-refund parade we just ran through. Department stores are benefiting from foreign tourists. The marts have a better competitive setup, and Vietnam’s Westlake posted a record operating-profit quarter. Company-reported Q2 sales rose 4% to 3.485 trillion won, while operating profit rose 121.2% to 89.9 billion won. On its face, that missed the 113.3 billion won analyst expectation. But Lotte booked 22.8 billion won of identified one-time costs, so the adjusted read is materially better. Foreign tourists buying department-store luxury is great; a mart division projected to rise 17% in July is the part I’d keep watching. People don’t wander into discount stores because an earnings deck feels optimistic. Exactly. Take out the 8.2 billion won in voluntary-retirement costs and the 14.6 billion won Cultureworks inventory loss, then see whether those two pillars hold into the second half. That’s a different earnings-quality question from ANF and URBN’s company-reported tariff refunds. If you found today’s briefing useful, please subscribe or leave a review wherever you’re listening. Reviews help other people find Fashion Business Daily, and they help us keep bringing you the news that matters.
Links to every story are in the show notes. If one caught your attention, take a look when you have a minute. Thanks for spending part of your Friday with us. That’s Fashion Business Daily for today. This is a Lantern Podcast.