We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Target Raises 2026 Guidance as Tariff Refunds Boost Q2 Profitability
Read MoreHide Full Article
Key Takeaways
TGT's Q2 sales rose 5.3% to $26.54B, with comps up 3.8% and digital sales up 8.7%.
Target raised 2026 sales growth to around 5% and adjusted EPS guidance to $9.90-$10.90.
TGT's $994M tariff refund added $1.65 per share, while underlying margins still improved year over year.
Target Corporation (TGT - Free Report) delivered stronger second-quarter sales, traffic and profitability and raised its fiscal 2026 outlook. The results show broader operating momentum, but the unusually large tariff-refund benefit makes the quality of the earnings improvement more important than the headline profit growth.
The central question is how much of the quarter can carry into the back half. Underlying margins improved even without the refund, while Target is still investing heavily in stores, merchandising, technology and value.
Target's Q2 Growth Broadens Across the Business
Second-quarter net sales increased 5.3% year over year to $26.54 billion. Comparable sales rose 3.8%, driven mainly by a 3.6% increase in traffic. Store comparable sales grew 2.7%, while comparable digital sales advanced 8.7%.
The sales gains were broad across the assortment. All six core merchandising categories posted year-over-year growth, with Fun 101 delivering double-digit gains and Food & Beverage and Beauty posting high-single-digit growth. Non-merchandise sales also increased 20.1%, supported by Roundel, Target Plus and Target Circle 360.
Target Corporation Price, Consensus and EPS Surprise
Target raised its full-year net sales growth outlook to a range around 5%, one percentage point above its prior view. The company also lifted its adjusted earnings guidance to $9.90-$10.90 per share, including the $1.65-per-share tariff-refund benefit recognized in the second quarter.
The guidance also points to improvement beyond that one-time item. Excluding tariff refunds, Target expects its full-year operating margin rate to run about 50 basis points above last year's adjusted 4.6% rate. That suggests the earnings recovery is not solely dependent on the refund.
Target recognized a $994 million pretax tariff refund in the second quarter. The benefit added $1.65 per share to earnings and contributed 3.7 percentage points, or 370 basis points, to both the gross margin rate and operating margin rate.
Management said the refund represented the significant majority of International Emergency Economic Powers Act tariff refunds applied for to date, although additional refunds are expected. Excluding the refund, gross margin still improved about 100 basis points and operating margin rose roughly 70 basis points year over year.
TGT's Back-Half Investments Set Up the Next Test
Target plans to introduce Target Beauty Studio in more than 600 stores and continue investments in remodels, merchandising, technology and lower prices. Those initiatives can support traffic and category relevance, but they also keep spending elevated as the company works to turn sales growth into durable operating leverage.
Competition raises the execution bar. Walmart Inc. (WMT - Free Report) continues to emphasize everyday low prices and a broad assortment, while Costco Wholesale Corporation (COST - Free Report) relies on low prices, high sales volumes and rapid inventory turnover. Target's SG&A rate rose about 30 basis points to 21.6% in the second quarter, and future tariff-related costs remain uncertain.
TGT's Signals Reflect a Balanced Risk Picture
The bottom line is that Target's second-quarter event improved the fundamental picture, but the quality of the gains matters. Broader sales growth and better underlying margins support the outlook, while the large nonrecurring refund and ongoing investment requirements temper the read-through from reported profitability.
Image Source: Zacks Investment Research
TGT currently carries a Zacks Rank #3 (Hold). It also has a VGM Score of A and Momentum Score of A, along with a Value Score of B and Growth Score of B. The favorable Style Scores point to attractive characteristics across several investing approaches, but they are designed to complement the Zacks Rank. The combination supports a balanced near-term view rather than an aggressive conclusion from one strong quarter. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
View the Zacks #1 Rank List
Image: Bigstock
Target Raises 2026 Guidance as Tariff Refunds Boost Q2 Profitability
Key Takeaways
Target Corporation (TGT - Free Report) delivered stronger second-quarter sales, traffic and profitability and raised its fiscal 2026 outlook. The results show broader operating momentum, but the unusually large tariff-refund benefit makes the quality of the earnings improvement more important than the headline profit growth.
The central question is how much of the quarter can carry into the back half. Underlying margins improved even without the refund, while Target is still investing heavily in stores, merchandising, technology and value.
Target's Q2 Growth Broadens Across the Business
Second-quarter net sales increased 5.3% year over year to $26.54 billion. Comparable sales rose 3.8%, driven mainly by a 3.6% increase in traffic. Store comparable sales grew 2.7%, while comparable digital sales advanced 8.7%.
The sales gains were broad across the assortment. All six core merchandising categories posted year-over-year growth, with Fun 101 delivering double-digit gains and Food & Beverage and Beauty posting high-single-digit growth. Non-merchandise sales also increased 20.1%, supported by Roundel, Target Plus and Target Circle 360.
Target Corporation Price, Consensus and EPS Surprise
Target Corporation price-consensus-eps-surprise-chart | Target Corporation Quote
TGT's Guidance Raise Signals Better Underlying Trends
Target raised its full-year net sales growth outlook to a range around 5%, one percentage point above its prior view. The company also lifted its adjusted earnings guidance to $9.90-$10.90 per share, including the $1.65-per-share tariff-refund benefit recognized in the second quarter.
The guidance also points to improvement beyond that one-time item. Excluding tariff refunds, Target expects its full-year operating margin rate to run about 50 basis points above last year's adjusted 4.6% rate. That suggests the earnings recovery is not solely dependent on the refund.
Target's Tariff Refund Distorts Reported Profitability
Target recognized a $994 million pretax tariff refund in the second quarter. The benefit added $1.65 per share to earnings and contributed 3.7 percentage points, or 370 basis points, to both the gross margin rate and operating margin rate.
Management said the refund represented the significant majority of International Emergency Economic Powers Act tariff refunds applied for to date, although additional refunds are expected. Excluding the refund, gross margin still improved about 100 basis points and operating margin rose roughly 70 basis points year over year.
TGT's Back-Half Investments Set Up the Next Test
Target plans to introduce Target Beauty Studio in more than 600 stores and continue investments in remodels, merchandising, technology and lower prices. Those initiatives can support traffic and category relevance, but they also keep spending elevated as the company works to turn sales growth into durable operating leverage.
Competition raises the execution bar. Walmart Inc. (WMT - Free Report) continues to emphasize everyday low prices and a broad assortment, while Costco Wholesale Corporation (COST - Free Report) relies on low prices, high sales volumes and rapid inventory turnover. Target's SG&A rate rose about 30 basis points to 21.6% in the second quarter, and future tariff-related costs remain uncertain.
TGT's Signals Reflect a Balanced Risk Picture
The bottom line is that Target's second-quarter event improved the fundamental picture, but the quality of the gains matters. Broader sales growth and better underlying margins support the outlook, while the large nonrecurring refund and ongoing investment requirements temper the read-through from reported profitability.
Image Source: Zacks Investment Research
TGT currently carries a Zacks Rank #3 (Hold). It also has a VGM Score of A and Momentum Score of A, along with a Value Score of B and Growth Score of B. The favorable Style Scores point to attractive characteristics across several investing approaches, but they are designed to complement the Zacks Rank. The combination supports a balanced near-term view rather than an aggressive conclusion from one strong quarter. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.