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Target Raises View as Growth Momentum Extends Beyond Tariff Tailwinds
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Key Takeaways
Target raised its fiscal 2026 net sales growth view to around 5% after strong first-half results.
Target's digital comparable sales rose 8.7%, aided by more than 25% growth in same-day delivery.
Roundel, Circle 360 and Target marketplace growth drove 20.1% growth in non-merchandise sales.
Target Corporation (TGT - Free Report) upgraded its fiscal 2026 outlook following a strong first-half performance. The company raised its full-year net sales growth expectation to around 5%, one percentage point above the previous outlook. Target also increased its earnings per share guidance to $9.90-$10.90, which includes second-quarter tariff refund benefits of $1.65. This raises the question of whether the company’s growth momentum can continue beyond temporary tariff-related benefits.
Target reported adjusted earnings of $4.11 per share, compared with $2.05 in the year-ago period. The quarter included a $994 million benefit from tariff refunds. The big-box retailer also generated net sales of $26,539 million, reflecting a 5.3% year-over-year increase.
However, Target’s recent performance indicates that growth is being supported by more than just tariff-related benefits. Excluding tariff refunds, adjusted earnings per share increased 20% year over year in the second quarter, reflecting improvement in underlying operations. The midpoint of the updated earnings outlook, excluding tariff refunds, also represents a 75-cent increase from the previous guidance of $7.50-$8.50 per share.
Sales momentum has been supported by improving customer engagement, digital growth and broad-based category strength. Comparable sales increased 3.8%, driven by a 3.6% rise in traffic, while digital comparable sales grew 8.7%, helped by more than 25% growth in same-day delivery. These trends highlight improving demand and stronger execution across channels.
Target reported strength in Food & Beverage, Beauty and Fun101 categories, while higher-margin revenue streams gained momentum. Roundel advertising revenues, Target Circle 360 membership revenues and Target+ marketplace growth helped drive 20.1% growth in non-merchandise sales.
These factors suggest that Target’s growth momentum is increasingly supported by operational improvements rather than temporary tariff-related benefits.
How Does Target Stack Up Against Its Industry?
Target, which competes with Dollar General Corporation (DG - Free Report) and Costco Wholesale Corporation (COST - Free Report) , has seen its shares rally 26% over the past three months against the industry’s 2.4% decline. While shares of Dollar General have risen 14.1%, those of Costco have fallen 9.2% in the aforementioned period.
Image Source: Zacks Investment Research
What Does Target’s Current Valuation Suggest?
From a valuation standpoint, Target's forward 12-month price-to-earnings ratio stands at 18.17, lower than the industry’s 30.20. However, the stock is trading above its 12-month median level of 14.50.
Target is trading at a discount to Costco (with a forward 12-month P/E ratio of 41.58) but at a premium to Dollar General (15.60).
Image Source: Zacks Investment Research
What Do Earnings Estimates Signal for Target?
The Zacks Consensus Estimate for Target’s current financial-year sales and earnings per share implies year-over-year growth of 4.6% and 13.1%, respectively. For the next fiscal year, the consensus estimate indicates a 2.4% rise in sales and 7.6% growth in earnings.
The consensus estimates for earnings per share for the current and next fiscal year have increased 18 cents and 26 cents to $8.56 and $9.21, respectively, over the past seven days.
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Target Raises View as Growth Momentum Extends Beyond Tariff Tailwinds
Key Takeaways
Target Corporation (TGT - Free Report) upgraded its fiscal 2026 outlook following a strong first-half performance. The company raised its full-year net sales growth expectation to around 5%, one percentage point above the previous outlook. Target also increased its earnings per share guidance to $9.90-$10.90, which includes second-quarter tariff refund benefits of $1.65. This raises the question of whether the company’s growth momentum can continue beyond temporary tariff-related benefits.
Target reported adjusted earnings of $4.11 per share, compared with $2.05 in the year-ago period. The quarter included a $994 million benefit from tariff refunds. The big-box retailer also generated net sales of $26,539 million, reflecting a 5.3% year-over-year increase.
However, Target’s recent performance indicates that growth is being supported by more than just tariff-related benefits. Excluding tariff refunds, adjusted earnings per share increased 20% year over year in the second quarter, reflecting improvement in underlying operations. The midpoint of the updated earnings outlook, excluding tariff refunds, also represents a 75-cent increase from the previous guidance of $7.50-$8.50 per share.
Sales momentum has been supported by improving customer engagement, digital growth and broad-based category strength. Comparable sales increased 3.8%, driven by a 3.6% rise in traffic, while digital comparable sales grew 8.7%, helped by more than 25% growth in same-day delivery. These trends highlight improving demand and stronger execution across channels.
Target reported strength in Food & Beverage, Beauty and Fun101 categories, while higher-margin revenue streams gained momentum. Roundel advertising revenues, Target Circle 360 membership revenues and Target+ marketplace growth helped drive 20.1% growth in non-merchandise sales.
These factors suggest that Target’s growth momentum is increasingly supported by operational improvements rather than temporary tariff-related benefits.
How Does Target Stack Up Against Its Industry?
Target, which competes with Dollar General Corporation (DG - Free Report) and Costco Wholesale Corporation (COST - Free Report) , has seen its shares rally 26% over the past three months against the industry’s 2.4% decline. While shares of Dollar General have risen 14.1%, those of Costco have fallen 9.2% in the aforementioned period.
Image Source: Zacks Investment Research
What Does Target’s Current Valuation Suggest?
From a valuation standpoint, Target's forward 12-month price-to-earnings ratio stands at 18.17, lower than the industry’s 30.20. However, the stock is trading above its 12-month median level of 14.50.
Target is trading at a discount to Costco (with a forward 12-month P/E ratio of 41.58) but at a premium to Dollar General (15.60).
Image Source: Zacks Investment Research
What Do Earnings Estimates Signal for Target?
The Zacks Consensus Estimate for Target’s current financial-year sales and earnings per share implies year-over-year growth of 4.6% and 13.1%, respectively. For the next fiscal year, the consensus estimate indicates a 2.4% rise in sales and 7.6% growth in earnings.
The consensus estimates for earnings per share for the current and next fiscal year have increased 18 cents and 26 cents to $8.56 and $9.21, respectively, over the past seven days.
Image Source: Zacks Investment Research
Target currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.