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Target's Retail Media Growth Highlights an Expanding Profit Lever
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Key Takeaways
Target's Roundel gross billings rose nearly 20% year over year in fiscal Q2 2026.
Advertising revenues reached $279 million in Q2, up from $217 million a year earlier.
Roundel's growth is strengthening Target's higher-margin revenue mix and supporting margins.
Target Corporation’s (TGT - Free Report) retail media business, Roundel, remained a notable growth driver in the second quarter of fiscal 2026. Management said gross billings from Roundel increased nearly 20% year over year. Non-merchandise sales grew 20.1%, with Roundel among the businesses driving that strength.
The company reported $279 million in advertising revenues for the quarter compared with $217 million in the year-ago period. Advertising revenues for the first half increased to $525 million from $379 million. Target said these revenues primarily reflect advertising services provided through its Roundel digital advertising business.
Roundel's importance is becoming more visible in Target’s profit mix. The company said its second-quarter gross margin rate, excluding tariff refunds, was roughly one percentage point higher than last year. Part of that improvement came from continued growth in advertising and non-merchandise sales, alongside the comparison against elevated markdown and purchase-order cancellation costs in the prior year.
The expansion of Roundel highlights the growing importance of higher-margin non-merchandise revenues within Target’s business mix. As Roundel continues to scale, its growth is strengthening Target’s mix of higher-margin revenue streams, which management said are contributing to outsized top- and bottom-line growth. Continued growth in advertising and non-merchandise sales is also supporting the retailer’s underlying margin performance.
How WMT & DG Are Scaling Retail Media Compared With Target
Walmart Inc. (WMT - Free Report) is scaling its retail media business rapidly, with global advertising growing 38% in second-quarter fiscal 2027 and Walmart U.S. advertising also up 38%. Walmart Connect, excluding VIZIO, advanced 43%, while advertising helped improve business mix and e-commerce economics. Walmart also strengthened the platform through its Vibe acquisition, aimed at expanding self-service tools and helping advertisers measure results against actual shopping behavior.
Dollar General Corporation (DG - Free Report) is similarly developing DG Media Network as a profit lever. Dollar General said the network reached $170 million in annual volume at the end of last year and is expected to grow meaningfully. Dollar General is expanding advertiser opportunities across stores, its app and website while increasing digital engagement. Dollar General also identifies DG Media Network growth among the initiatives expected to support gross margin expansion.
How Does Target Stack Up Against Its Industry?
Target has seen its shares rally 12.6% over the past three months against the industry’s 7.6% decline.
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 16.30, lower than the industry’s 27.04. However, the stock is trading above its 12-month median level of 14.84.
Image Source: Zacks Investment Research
What Do Earnings Estimates Signal for Target?
The Zacks Consensus Estimate for Target’s earnings per share for the current and next fiscal year has increased by 16 cents and 9 cents to $10.43 and $9.38, respectively, over the past 30 days.
View the Zacks #1 Rank List
Image: Bigstock
Target's Retail Media Growth Highlights an Expanding Profit Lever
Key Takeaways
Target Corporation’s (TGT - Free Report) retail media business, Roundel, remained a notable growth driver in the second quarter of fiscal 2026. Management said gross billings from Roundel increased nearly 20% year over year. Non-merchandise sales grew 20.1%, with Roundel among the businesses driving that strength.
The company reported $279 million in advertising revenues for the quarter compared with $217 million in the year-ago period. Advertising revenues for the first half increased to $525 million from $379 million. Target said these revenues primarily reflect advertising services provided through its Roundel digital advertising business.
Roundel's importance is becoming more visible in Target’s profit mix. The company said its second-quarter gross margin rate, excluding tariff refunds, was roughly one percentage point higher than last year. Part of that improvement came from continued growth in advertising and non-merchandise sales, alongside the comparison against elevated markdown and purchase-order cancellation costs in the prior year.
The expansion of Roundel highlights the growing importance of higher-margin non-merchandise revenues within Target’s business mix. As Roundel continues to scale, its growth is strengthening Target’s mix of higher-margin revenue streams, which management said are contributing to outsized top- and bottom-line growth. Continued growth in advertising and non-merchandise sales is also supporting the retailer’s underlying margin performance.
How WMT & DG Are Scaling Retail Media Compared With Target
Walmart Inc. (WMT - Free Report) is scaling its retail media business rapidly, with global advertising growing 38% in second-quarter fiscal 2027 and Walmart U.S. advertising also up 38%. Walmart Connect, excluding VIZIO, advanced 43%, while advertising helped improve business mix and e-commerce economics. Walmart also strengthened the platform through its Vibe acquisition, aimed at expanding self-service tools and helping advertisers measure results against actual shopping behavior.
Dollar General Corporation (DG - Free Report) is similarly developing DG Media Network as a profit lever. Dollar General said the network reached $170 million in annual volume at the end of last year and is expected to grow meaningfully. Dollar General is expanding advertiser opportunities across stores, its app and website while increasing digital engagement. Dollar General also identifies DG Media Network growth among the initiatives expected to support gross margin expansion.
How Does Target Stack Up Against Its Industry?
Target has seen its shares rally 12.6% over the past three months against the industry’s 7.6% decline.
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 16.30, lower than the industry’s 27.04. However, the stock is trading above its 12-month median level of 14.84.
Image Source: Zacks Investment Research
What Do Earnings Estimates Signal for Target?
The Zacks Consensus Estimate for Target’s earnings per share for the current and next fiscal year has increased by 16 cents and 9 cents to $10.43 and $9.38, respectively, over the past 30 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.