Nintendo just got a nice boost from tariff refunds

Nintendo's earnings got an unexpected boost from US tariff refunds in the latest quarter. Philip Fong/AFP/Getty Images Some companies are getting an unexpected lift from billions of dollars in returned US tariffs. Nintendo recorded a $300 million tariff refund. The refunds are lifting profits and margins, but analysts warn the benefits are unlikely to last. An unusual boost is showing up in some corporate earnings this summer: tariff refunds. Nintendo became the latest beneficiary of the boost on Thursday, reporting net profit of 147.4 billion Japanese yen, or $931 million, for the quarter ending June, up 54% from a year earlier and handily beating analyst expectations of 77.8 billion yen. Revenue fell about 10% to 517.8 billion yen, but still came in above expectations. Tariff refunds were a major contributor: The Kyoto-based maker of the Switch 2 said it recorded a $300 million tariff refund that had previously been recorded as cost of sales. Strong software sales, led by the video games Tomodachi Life: Living the Dream and Pokémon Pokopia, also helped lift margins. Shares of Nintendo closed 5% higher on Friday following the results. They are 24% lower this year. In its presentation, Nintendo said the tariffs related to the refunds "were primarily borne by the company rather than passed on to consumers through product prices." Nintendo has not said how it plans to use the refunds. The company did not immediately respond to a request for comment from Business Insider. Nintendo is fighting a class-action lawsuit over the tariff refunds. Two US customers sued the company in April, arguing that Nintendo could effectively recover its tariff costs twice — first through higher prices that they allege were passed on to consumers, and again through refunds from the US government. Nintendo moved to dismiss the case in July, arguing that customers "received exactly what they bargained and paid for" and have no legal right to a rebate simply because the tariffs were later struck down. An earnings season of tariff refunds Nintendo's tariff windfall is part of a broader earnings-season trend, with companies from Apple to Amazon to Siemens Healthineers recently disclosing sizable tariff refunds or related earnings benefits. Companies are taking different approaches to the windfall. Apple said tariff refunds added about two percentage points to its June-quarter gross margin and 11 cents to diluted earnings per share. CEO Tim Cook has said the company will reinvest the refunds in additional US innovation and advanced manufacturing. Amazon said it received about $600 million in tariff refunds in the second quarter and plans to reimburse customers in limited cases where it can determine they directly bore the tariff cost. Siemens Healthineers also got a sizable boost. Tariff refunds helped lift the German medical-technology company's adjusted operating margin to 19.1% from the 16.8% a year ago and contributed to a 16% rise in adjusted operating profit to 1.1 billion euros. The company also raised its full-year earnings-per-share forecast to reflect the refunds. Elsewhere, Walmart has said it expects to return its anticipated refunds to consumers through price reductions, while McCormick and Campbell's have said they will use proceeds to offset higher costs. The repayments follow a February 20 Supreme Court ruling that the International Emergency Economic Powers Act did not authorize the president to impose the tariffs. The US Court of International Trade has overseen the process of returning the duties to importers. About $166 billion was collected under the invalidated tariffs, with roughly $100 billion in refunds processed by early August, official filings show. Analysts caution that the refunds offer just a one-time boost to earnings. "Most tariff proceeds will fail to sustain profitability as companies prioritize competitive prices and mitigating costs," wrote analysts at S&P Global in a report last month. Read the original article on Business Insider