The two largest US mass merchants reported a day apart this week. Target published its second quarter on Wednesday, August 19. Walmart followed on Thursday, August 20, with the second quarter of its fiscal 2027. Read together, they are mostly a story about one-time money and two decisions about where to put it.

The top line

Target's net sales rose 5.3% to 26.5 billion dollars and comparable sales grew 3.8%, according to the company's release. Traffic was up 3.6% and the average ticket 0.2%, so almost all of the growth came from more visits. Store comparable sales rose 2.7% and digital comparable sales 8.7%, "led by more than 25 percent growth in same-day delivery," the company said. Wall Street had expected comps of 2.4%, according to StreetAccount data cited by CNBC.

Walmart's total revenue rose 5.9% to 187.9 billion dollars, or 5.1% in constant currency, according to its release. Walmart U.S. comparable sales, excluding fuel, rose 2.6%, with transactions up 1.5% and average ticket up 1.1%. Analysts had expected 3.5%, according to FactSet data cited by CNBC. CNBC reported that a 0.8 point headwind in health and wellness, as price caps on certain drugs took effect, weighed on the number.

Where Walmart pulled clearly ahead is digital. Global e-commerce grew 23%, with Walmart U.S. up 24% and Sam's Club U.S. up 26%, according to the release. Global advertising grew 38% and membership fee revenue 17%. Fox Business reported that store-fulfilled delivery at Walmart U.S. rose 40% and marketplace net sales more than 50%. Target's same-day number is strong, but its digital business grows at about a third of Walmart's pace.

The refunds

Both companies booked refunds of tariffs paid under the International Emergency Economic Powers Act.

Target recognized 994 million dollars of pretax refunds within gross margin and operating income, according to its release. They added 3.7 percentage points to both. Reported gross margin was 33.7%; excluding refunds, the company says the rate expanded about 100 basis points over last year's 29.0%. Reported operating margin was 9.6% against 5.2% a year earlier; strip out the 3.7 points and it is roughly 5.9%, a Retail to See calculation. The refunds contributed 1.65 dollars to earnings per share of 4.11, so the underlying figure is about 2.46 dollars against 2.05 a year ago.

Walmart did not quantify the refund in its release, but CFO John David Rainey told CNBC the company was eligible for roughly 2.9 billion dollars and had just under 100 million still to collect. Reported operating income rose 28.8% to 9.4 billion dollars and adjusted operating income 17.4% in constant currency, both including the net refund effect, according to the release. Setting that aside, the company said underlying growth was at the top end of its guidance, which Modern Retail reported as 7% to 10%. Walmart U.S. gross profit rate rose 158 basis points, driven mainly by the refunds and partly offset by price investment.

Two uses for the same money

Here the quarters diverge. Walmart said it "prioritized investment in price," as reported by Fox Business, pointing to more than 11,000 rollbacks across US stores. Rainey told Modern Retail that a substantial portion was deployed at the end of the second quarter, with the bigger customer impact in the third. That is why Walmart's third-quarter guidance calls for operating income growth of only 2% to 4%, on net sales growth of 3% to 3.75%. Rainey also told CNBC the company expects just over 2 billion dollars of incremental fuel cost headwinds this year.

Target kept its refund in the numbers it guides to. Its new full-year earnings range of 9.90 to 10.90 dollars includes the 1.65 dollars from refunds. Excluding them, the range is 8.25 to 9.25 dollars against prior guidance of 7.50 to 8.50, as reported by CNBC. Target also said it has lowered prices on more than 10,000 items, but the refund itself flows to earnings rather than being earmarked for price.

The market rewarded the second choice in the short run. Target shares rose 4% on Wednesday, as reported by CNBC. Walmart closed about 9% lower on Thursday, even after raising full-year net sales growth to 4% to 5% and adjusted earnings per share to 2.80 to 2.87 dollars.

What the pairing says

Strip both refunds out and the picture is closer than the share prices suggest. Target's underlying margin improved by roughly 70 to 100 basis points and its traffic is growing faster than Walmart's. That is real progress, but from a low base, and CEO Michael Fiddelke told reporters that "two strong quarters is not the goal."

Walmart's softer comp came with faster e-commerce, advertising and membership growth, the profit pools that have defined its lead since we looked at its divergence from Amazon. It chose to spend a windfall on price in a quarter when, in Rainey's words to CNBC, consumers are "stretched thin." That costs margin now and is meant to buy share later.

What to watch

Walmart's third quarter will show whether 2.9 billion dollars of price investment moves transactions, which grew just 1.5%. Target's will show whether traffic gains hold once the refund is gone and the comparison gets harder. And for both, any further IEEPA refunds: Target's guidance includes none beyond the second quarter, and Walmart has under 100 million dollars left to collect.

Sources: Target Corporation, "Target Corporation Reports Second Quarter Earnings", August 19, 2026; CNBC, "Target says its turnaround is picking up steam, with help from a big tariff refund", August 19, 2026; Walmart Inc., second quarter fiscal 2027 earnings release (SEC exhibit), August 20, 2026; CNBC, "Walmart stock tumbles 9% after outlook disappoints Wall Street", August 20, 2026; Fox Business, "Walmart says it will use billions in tariff refunds to keep prices low", August 20, 2026; Modern Retail, "Walmart gets close to $3 billion in tariff refunds", August 20, 2026. Margin and EPS figures excluding refunds are Retail to See calculations from the companies' disclosures.