Newsletter · · Ashutosh Agarwal

Costco Hands Tariff Refunds Back to Shoppers as Nike Resets Its Outlook - The Squeezed Consumer: Tariffs & Trade-Down - Week of October 6, 2026

The Squeezed Consumer: Tariffs & Trade-Down for the week of October 6, 2026 (podcasts published September 29 to October 6). Costco put 184 million dollars of tariff refunds into lower prices, Nike guided fiscal 2027 revenue down high single digits with China down 26 percent, trucking tender volumes collapsed, and C.H. Robinson agreed to buy RXO for 5.8 billion dollars.

The Squeezed Consumer: Tariffs & Trade-Down

Week of October 6, 2026: Costco Hands Tariff Refunds Back to Shoppers as Nike Resets Its Outlook

For months the tariff question for retailers was simple: who eats the cost?

This week, the biggest warehouse club in America answered a different one. What do you do when the money comes back?

Costco's answer: you hand it to the shopper.

That one decision says more about where the trade-down is heading than any survey. Meanwhile, the most famous brand in sporting goods had a quarter that had almost nothing to do with tariffs, and everything to do with selling shoes people want.

And diesel finally stopped setting records. It's still the second-highest price ever, so I'm not breaking out the champagne.

Let's get into it.

TL;DR

  • Costco is recycling tariff refunds into lower prices. $184 million so far, about a third of what it expects this quarter, put into staples, produce, meat, drinks and some home goods. A value leader is using its refund windfall to widen the price gap. (Operator, via The CPG Guys)
  • Costco's quarter was very strong: comps +9.4% (US +11%), EPS $6.75 vs $6.54 expected, and record gas penetration as pump prices climbed.
  • Nike guided full-year FY2027 revenue down high single digits, against roughly -2.3% expected. Greater China fell 26%. The stock is down about 50% this year. Gross margin improved, so this isn't a tariff story. (CEO Elliott Hill; Telsey; Williams Trading's Sam Poser)
  • Sam Poser gave up a Buy rating he'd held for two-plus years and doesn't expect sales to improve until fiscal 2028.
  • The freight slowdown showed up on schedule. Truck tender volumes "collapsed" at the end of September, as brokers warned last week. Spot truck rates are still running about 42% above last year.
  • Trans-Pacific container rates are at "COVID level," and the data doesn't explain why. China-to-Mediterranean rates collapsed over the same weeks. SONAR's Zach Strickland is skeptical of both the demand story and the weather story.
  • Diesel fell 14.7¢ to $6.382, its first non-record week in a month. Distillate inventories are flat when they should be building ahead of winter.
  • C.H. Robinson is buying RXO for $5.8B. The combined broker would hold about 20% of the US brokerage market, with ~$300M in targeted savings that Bloomberg Intelligence thinks may be conservative.

What's New

1. Costco is spending its tariff refunds on lower prices

On The CPG Guys: "Commerce Riff with Sri & PVSB, September 29, 2026" (Sep 30), host PVSB went through Costco's fiscal fourth quarter. The most important number wasn't on the income statement.

"Costco reinvested $184 million of tariff refunds into lower prices on staples, produce, meat, beverages, and even some home furnishings."

That's only about one-third of the refunds Costco expects this quarter, and management plans more reinvestment.

Some background. Earlier this year the Supreme Court struck down a large chunk of the emergency tariffs, and importers have been getting money back. Back in August I flagged that these refunds were quietly inflating reported margins at some retailers. Costco is doing the opposite. It's turning the refund into a price cut.

Why that matters: when the strongest value player cuts prices while everyone else is still nursing tariff-swollen costs, the gap between "cheap" and "not cheap" gets wider. That's how trade-down share gains become permanent.

The rest of the quarter, as relayed on the show (these are company figures, so operator-grade):

  • Profit: $3.0 billion, or $6.75 a share, up from $2.61 billion and ahead of the $6.54 analysts expected.
  • Revenue: $95.72 billion, up from $86.16 billion.
  • Comparable sales: +9.4% overall. US +11%, Canada +5%, international +7%. Digital up nearly 20%. Excluding gas and currency, still +6.7%.
  • Gas: a record year. US member gas penetration hit an all-time high, which CEO Ron Vachris tied directly to the price run-up from the Iran war. When pump prices are high everywhere, a cheaper gallon at Costco is worth more.
  • Membership fees: $1.85 billion. 28 warehouses opened this fiscal year, 33 planned for fiscal 2027.

CFO Gary Millerchip's line is the one I'd frame:

Members are spending and still willing to trade up into discretionary categories when the value is there.

Note the shape of that. The shopper isn't refusing to spend. They're refusing to overpay. That favors the value channel, not discretionary retail as a whole.

Why it matters: Costco is proof that the trade-down winner can grow faster and cut prices at the same time. Every mid-tier grocer and department store has to answer that.

2. Nike's quarter: a reset, not a tariff problem

Nike reported fiscal Q1 FY2027 (June to August 2026) on October 1. It was ugly. But read it carefully before you file it under "tariffs."

On CNBC's Fast Money: "Rate Peak or Pause?... Nike Reports Results 10/1/26" (Oct 1), the anchors set out the numbers. Revenue came in at $11.21 billion, the "first revenue miss in exactly two years." Nike now sees fiscal 2027 revenue "declining high single digits versus the 2.3 decline that was expected."

Then Dana Telsey of Telsey Advisory Group, a long-time retail analyst, gave the part that matters for this newsletter:

"The gross margin was better. North America was better."

Gross margin is what's left after the cost of making and shipping the product, so it's where tariffs show up. If it got better, tariffs aren't what's breaking Nike.

Telsey also noted this was a new CFO's first call and the first time Nike has ever given annual guidance. "Could a kitchen sink it, who knows." (A "kitchen sink" quarter is when new management throws every bad number out at once so the only way from there is up.) Her bigger point was that rivals like On and Hoka have taken share, and "Accelerating growth rates will give you the multiple. You don't have that now."

The next morning on Squawk on the Street: "9AM Hour... Nike Tumbles 10/2/26" (Oct 2), CNBC played a clip of CEO Elliott Hill from the call. This is the operator speaking:

"Our Nike performance business is not yet large enough to offset the pressure we're seeing in Nike Sportswear, Jordan brand, and Greater China... I would characterize that our comeback is ongoing. At our size and scale, meaningful change takes time."

The damage from that segment:

  • Greater China down 26%. Jim Cramer (a commentator, not an insider) said Nike's China market share went from 27% five years ago to 16% now, "a 40 percent decline in their share in China in five years."
  • Sportswear revenue down low double digits. That's roughly half of Q1 revenue.
  • Dunk revenue cut 50%.
  • Inventories "a little bit better."
  • The CFO said the dividend is "a significant priority," with a 72% payout ratio. Cramer called that the most positive thing on the call.
  • "At least a dozen price target cuts." Bespoke counts that Nike has missed on the earnings-day stock reaction 9 of the last 12 quarters.

Why it matters: if you hold Nike for a tariff relief rally, you're holding it for the wrong reason. The margin line is fine. The problem is product.

3. A two-year Buy rating gets dropped

The most telling interview of the week was on Squawk on the Street: "10AM Hour: G7 To Release 100M Barrels of Oil, Nike Goes off Track..." (Oct 2). Sam Poser, senior footwear and apparel analyst at Williams Trading, had just cut Nike to Hold after rating it Buy for more than two years. The stock is now "down a full 50 percent on the year," and Nike announced a third round of layoffs.

Poser's timeline is what changes the model:

"It looks like... margins may recover, start recovering in the middle of next year. But they said... reinvestments from the restructuring are going to be made on the front end. So that makes the margin story harder."

And on sales:

"I think it's going to be tough for them to convince anybody that sales are really going to improve probably until we get to... fiscal 28, which is going right into the Olympics."

His diagnosis is a "stalled product creation engine." Nike cut support for its cheaper core footwear and lost its "EKINs," the field reps who talked to stores and shoppers and fed that information back to headquarters.

"They lost so much talent in the organization, from supply chain to product creation to those folks that were always on the ground... And that all came home to roost yesterday evening."

Asked whether the macro economy is to blame, he gave the best line of the week: "Yes to the complexity, but no to the cause." His evidence is Dick's Sporting Goods, where the core Dick's business is "quite good" and the acquired Foot Locker business "isn't." Same shopper, same economy, different products.

Why it matters: the catalyst is now the mid-November investor day. Until then the analyst with the model is telling you the recovery is a fiscal 2028 story.

4. The freight slowdown arrived when brokers said it would

Last week a freight broker predicted a "significant drop-off" in the first two weeks of October, because shippers had pulled October loads into September to flatter quarter-end numbers.

It happened.

On FreightWaves Today | October 1 (Oct 1), Zach Strickland, head of market intelligence at FreightWaves' SONAR data service, said tender volumes (the number of loads shippers are offering to trucking companies) "collapsed" at the very end of September. He called September "overheated" against July and August.

He's careful not to call it a recession signal. October is normally soft, and a lot of freight is moving to rail (domestic intermodal is up 8% year over year). But the macro backdrop around it isn't comforting:

  • PCE inflation is "still fairly sticky, above 3%."
  • Consumer confidence "deteriorated this week pretty significantly."
  • Dry van rejection rates, the share of loads carriers turn down, are stuck around 11%. Guest Thomas Wasson's advice to anyone heading into year-end contract talks: "expect to see continued repricing upwards."

So volumes are softening while rates aren't. For a retailer, that's the worst mix: less freight, and still more expensive.

Why it matters: freight costs are still climbing just as goods demand looks to be cooling. That shows up in Q4 gross margins at importers that haven't hedged.

5. Trans-Pacific rates are at "COVID level," and the data can't explain it

This is the most intriguing freight story of the week, from Freightonomics: "Playing defense" (Oct 1).

Strickland showed Freightos spot rates for a 40-foot container. China to the North American West Coast, America's biggest import lane and the route into Los Angeles and Long Beach, "continues to grow." China to the Mediterranean "has actually collapsed, and they've completely swapped positions."

The usual explanations don't fit:

  • Not demand. SONAR bookings data show demand to Europe hasn't fallen. "It is not a demand-side narrative."
  • Not typhoons. "Typhoons impact China, which is the origination point going to the Mediterranean too... So I don't buy that one."
  • Partly the Suez Canal. More ships are going back through Suez ("26% increases or something like that"), which adds capacity to Europe. Even so, Strickland isn't sure that's the whole story, and blank sailings (cancelled voyages carriers use to keep ships full) are "still high."

His bottom line: "global trade patterns are getting disrupted unevenly and we're not seeing it play out rationally."

And why consumer investors should care:

"Shippers aren't going to order stuff as rates are that high, like we're talking about COVID level elevation on spot rates... this is a big deal if you're trying to forecast economic demand in the fourth quarter."

Why it matters: this squeeze is specific to America. Importers shipping to the US are paying pandemic-era prices while their European rivals get a discount. That's a real competitive gap for US retail margins.

6. Diesel stopped setting records, but don't relax

On FTR's State of Freight: "Trucking Market Update, Week Beginning September 28, 2026" (Sep 30), Avery Vise, FTR's VP of trucking, gave the good news and the bad news together:

"For the first time in four weeks, diesel prices did not set a record. The bad news is that even with a substantial decline, diesel prices are at their second highest weekly average ever."

The details:

  • National average diesel fell 14.7¢ to $6.382 a gallon. It had climbed 93¢ in three weeks to a record $6.529 for the week ended September 21.
  • The Rocky Mountain region still set a new all-time high.
  • WTI crude was $92.60 a barrel.
  • The bigger worry is distillate inventories, which were flat at a time of year they should be rising ahead of winter heating demand and the fall harvest. That has led to calls for a ban on diesel exports.
  • Truck spot rates were ~42% higher than a year ago (34% excluding fuel). Dry van +46%, refrigerated +47%, flatbed +42%, with load volume up about 9%.
  • 30-year mortgage rates hit 7.03%, the highest since January 2025. That's bad news for furniture and home-goods freight.

On Freightonomics, Strickland added that Persian Gulf crude flows are nearing pre-war levels but refined products such as diesel are moving at only about 50%. "Diesel prices still are probably going to be elevated throughout the rest of the year." His co-host put it more bluntly: we're in the "third or fourth inning."

Why it matters: diesel is the fastest route from geopolitics to the grocery shelf. More on that below.

7. C.H. Robinson buys RXO: the big brokers get bigger

On Bloomberg Intelligence: "CH Robinson to Buy RXO for $5.8 Billion in Bet on AI Model" (Oct 5), Lee Klaskow, BI's senior transport and logistics analyst, explained the deal. The #1 US freight broker is buying #3.

  • The combined company holds about 20% of the US brokerage market.
  • C.H. Robinson's broker productivity is up about 60% over the last couple of years, from "lean" management systems plus AI. The plan is to run RXO's brokers through the same system.
  • Management targets about $300 million in cost savings. Klaskow: "We think that 300 million could be deemed conservative," provided customer overlap stays low. He's watching that risk because RXO's earlier purchase of Coyote from UPS disappointed on exactly this point.
  • One more reason for scale: after the Supreme Court's Montgomery ruling, brokers can be held liable for accidents by trucks they hire, so insurance costs are rising. A bigger broker can negotiate better premiums.

He also pointed out that fuel surcharges cover 80-90% of carriers' extra fuel cost. Trucking surcharges reset in about a week, while rail can lag up to 60 days (about 30 is typical).

Why it matters: in a tight, costly freight market, scale and technology are becoming a moat. That's good for CHRW and tougher for small brokers. Though a FreightWaves Today report on October 2 found small brokers ($10-50M revenue) grew margins 37% last year while brokers over $100M grew volume 15%. Both models can work.

The Debate

Is the trade-down a lasting share gain, or a late-cycle warning that reverses?

The durable case got its best evidence this week.

Costco grew US comps 11% and cut prices with its refunds. Over on The Investor's Podcast: "TIP850: Walmart (WMT): From Discount Retailer to eCommerce Powerhouse" (Oct 1), hosts Kyle Grieve and Shawn O'Malley (investors, not insiders) explained the structural reason this keeps happening. Walmart's gross margin has risen only about one point since 2005, and its operating margin has actually fallen from 6% to 4%. That isn't failure. It's the strategy: pass the savings from scale back to shoppers as lower prices. In the hosts' words, that makes it "almost impossible for anyone besides Amazon and Costco... to compete with them."

They added that suppliers effectively fund Walmart's inventory (negative working capital of about -$27 billion), and that e-commerce is now about a quarter of revenue, growing 23%, with advertising up 38% last quarter. Those are durable advantages, not cyclical ones.

Dana Telsey, on Fast Money, added off-price to the list. Ross is posting double-digit comps for the first time in its history and is opening in Manhattan. She also said "that lower-income consumer, frankly, is surprising people with the spend that they have on goods... there's more flooding into the value names."

The late-cycle case is mostly in the macro numbers this week.

On Marketplace: "Nike's not just doing it" (Oct 2), the panel opened bluntly: "Real wages are not keeping up with inflation. Full stop." Procter & Gamble is losing share to cheaper store brands, and the "K-shaped economy" (affluent households doing fine, everyone else squeezed) has been running for some time. The question, as one panelist put it, is whether it will "bleed into other parts of our economy."

On Freightonomics, Strickland said shoppers are still spending, but "call it, put it on the credit card for now." That's the late-cycle tell: spending running ahead of income.

Telsey's holiday forecast sits between the two. Last year's holiday sales rose "nearly a 6%." This year she expects "a point or two lower."

My read: both can be true. The channel shift to value is structural; Costco and Walmart are built to win it. But the volume underneath it is being funded by credit and squeezed by fuel. Own the winners. Just don't confuse winning share with a growing pie.

Apparel: pass-through, or a permanent margin reset?

Nike muddied this debate this week. Its gross margin improved, so the margin problem isn't tariffs. Poser's warning is that margin recovery will be held back anyway, by Nike's own front-loaded restructuring spending.

The broader pricing pressure comes through the industrial data instead. On FreightWaves Today | October 2, the ISM manufacturing survey showed new orders expanding for a ninth straight month. But surveyed executives "continued to cite pricing pressures as a key concern, including rising transportation costs, partly due to elevated diesel and fuel prices, but also elevated input costs due to tariffs." Raw material prices rose for the 24th straight month.

That's cost pressure building upstream. The question for Q4 is who passes it on and who absorbs it.

Read-throughs

  • Grocery inflation is about to turn back up, and diesel is the fuse. On the same CPG Guys episode, Cal Poly agribusiness professor Rick Volpe said retailers and manufacturers have "been making explicit efforts to hold the line on price throughout 2026," and he doesn't think it can last. Grocery inflation was 2.2% in August (down from 2.7%), but he expects a Q4 uptick to about 2.7% for the year. Transport costs from warehouse to store reach shelf prices fastest. FMI's Andy Harig added that diesel-dependent farmers are making next season's planting decisions now, which "could keep pushing costs up well into 2027." The fuel run-up has already cost US consumers more than $113 billion since late February, per a Brown University tracker. Read-through: good for Costco (gas traffic) and for private label. Bad for branded packaged food holding price.
  • Branded packaged food loses shelf to store brands, and GLP-1 shrinks the basket. Marketplace flagged P&G's share loss to store brands. The CPG Guys cited a Cornell study: households with a GLP-1 user cut grocery spending by about 6% within six months, and about 9% (~$690 a year) in higher-income homes. Savory snacks fell 11%. Read-through: two headwinds at once for center-of-store brands. The richer shoppers trading into value stores are the same ones cutting snacks most.
  • Off-price benefits from Nike's mess. When a giant brand overproduces (Dunks, Air Force 1s, Jordan retros), the extra stock goes somewhere. On The Canadian Investor: "Lessons From 4 Market Leaders That Destroyed Their Moats" (Oct 5), the hosts described how Nike's direct-to-consumer push and inventory glut "turned an iconic brand into a discount brand," with revenue rising from $44 billion to $52 billion while earnings went nowhere. Read-through: more branded supply for TJX and Ross. That fits Telsey's note on Ross's record comps.
  • Mid-tier footwear retail: picking the right banner matters. Poser's Dick's-versus-Foot Locker split says the same customer is rewarding the store with fresher product. Read-through: in athletic retail, check the product pipeline before the macro.
  • LTL truckers may get a lift in about three months. FreightWaves noted that the ISM survey usually leads turning points in less-than-truckload (LTL) freight by about three months, and industrial customers make up about two-thirds of LTL revenue. Nine months of expanding new orders is a constructive setup for ODFL and XPO into early 2027, even as consumer truckload softens.

What Changed vs. Last Week

  • The broker's October slowdown call came true. Last week it was a forecast. This week SONAR showed tender volumes "collapsing" at the end of September.
  • Diesel turned, slightly. It went from a record $6.529 to $6.382: the first non-record week in four, but still the second-highest ever. Low distillate inventories are the new worry.
  • The trans-Pacific debate moved on. Last week the case was "supply choke, demand's normal." This week Strickland's data questioned both sides. Demand to Europe is fine, typhoons hit both lanes, and the US-specific premium is still largely unexplained.
  • Tariff refunds have changed sign. In August the story was refunds quietly inflating margins. This week the largest value retailer said it is giving them back as lower prices.
  • We finally heard from a value-retail operator directly. After weeks of second-hand trade-down commentary, Costco's own management confirmed comps of +11% in the US and record gas penetration.
  • Nike is clearly not a tariff story. Gross margin improved; the miss came from Sportswear, Jordan and China. The company's own CEO said the comeback is "ongoing," and a two-year Buy rating is gone.