Target Corp.: Q1 FY2026 earnings call

What management said about Q1 FY2026, from the documents filed with the SEC on 20 May 2026: press release. Guidance figures: 1 raised. The quarter’s numbers.

Read the filing

Key takeaways

• Net sales rose 6.7 percent: Net sales were $25.4 billion, up 6.7 percent. Merchandise sales rose 6.4 percent and non-merchandise sales rose 24.6 percent. Source
• EPS compared with adjusted base: Diluted EPS of $1.71 was 24.5 percent below GAAP EPS of $2.27, which included interchange settlement gains, and 31.6 percent above prior-year Adjusted EPS of $1.30. Source
• All six core categories grew: Net sales in each of the six core merchandising categories were higher than a year earlier, the company reported. Source
• Non-merchandise income grew sharply: Advertising revenue rose to $246 million from $163 million. Membership revenue from Target Circle 360 and the Target+ marketplace also grew. Source
• Gross margin rose on productivity: The gross margin rate rose on supply chain productivity, growth in advertising and other non-merchandise revenue, and lower markdown rates, partly offset by higher product costs. Source
• SG&A rate rose on labor and marketing: The SG&A rate rose on field team hours and training, higher incentive pay, capital project spending and marketing, partly offset by sales leverage. Source
• Capital spending rose 31 percent: Capital expenditures were $1.0 billion, up 31 percent, driven mainly by new stores and store remodels. Source
• No buybacks; dividend per share up: No stock was repurchased in the quarter, leaving about $8.3 billion of authorization. Dividend per share rose 1.8 percent. Source

“First quarter financial results were stronger than expected, providing encouraging early signs that our clarified strategy is resonating with our guests and driving broad-based growth across our business,”

Michael Fiddelke, Chief Executive Officer of Target

Guidance

What changed from last quarter

• Guidance raised: The 2026 net sales growth expectation moved from a range around 2 percent to a range around 4 percent. Source

Results and growth drivers

• Net sales rose 6.7 percent: Net sales were $25.4 billion, up 6.7 percent. Merchandise sales rose 6.4 percent and non-merchandise sales rose 24.6 percent. Source
• EPS compared with adjusted base: Diluted EPS of $1.71 was 24.5 percent below GAAP EPS of $2.27, which included interchange settlement gains, and 31.6 percent above prior-year Adjusted EPS of $1.30. Source
• Operating income fell from prior gains: Operating income of $1.1 billion was 22.9 percent below prior-year GAAP, which included $593 million of pretax interchange settlement gains, and 29.1 percent above prior-year Adjusted operating income. Source

Merchandise categories and channels

• All six core categories grew: Net sales in each of the six core merchandising categories were higher than a year earlier, the company reported. Source
• Hardlines and food led dollar gains: Hardlines (Fun 101) rose from $3,074 million to $3,522 million and food and beverage from $5,902 million to $6,263 million, the largest dollar increases among categories. Source
• Non-merchandise income grew sharply: Advertising revenue rose to $246 million from $163 million. Membership revenue from Target Circle 360 and the Target+ marketplace also grew. Source
• Same-day delivery drove digital growth: Same-day delivery powered by Target Circle 360 grew more than 27 percent, the main driver cited for digital sales growth. Source

“While we’re pleased with our Q1 performance, our focus remains on building consistent, long-term growth,”

Michael Fiddelke, Chief Executive Officer of Target

Demand and comparable sales

• Store and digital comparables both rose: Comparable store sales rose 4.7 percent after a 5.7 percent decline a year earlier. Comparable digital sales rose 8.9 percent after a 4.7 percent gain. Source
• Transactions and ticket both contributed: Comparable sales growth came from more transactions and a higher average transaction amount, after both measures fell in the year-earlier quarter. Source
• Stores fulfilled most merchandise sales: Stores fulfilled 97.6 percent of merchandise sales, unchanged from a year earlier, with other fulfillment at 2.4 percent. Source

Gross margin, SG&A and profit rates

• Gross margin rose on productivity: The gross margin rate rose on supply chain productivity, growth in advertising and other non-merchandise revenue, and lower markdown rates, partly offset by higher product costs. Source
• SG&A rate rose on labor and marketing: The SG&A rate rose on field team hours and training, higher incentive pay, capital project spending and marketing, partly offset by sales leverage. Source
• Operating margin compared with two bases: The operating income margin rate was 4.5 percent, against 6.2 percent GAAP and 3.7 percent Adjusted in the prior-year quarter. Source
• Tax rate fell on discrete items: Net interest expense was $117 million, against $116 million. The effective tax rate fell to 24.4 percent from 25.0 percent on lower discrete tax expenses. Source

Capital, cash and shareholder returns

• Capital spending rose 31 percent: Capital expenditures were $1.0 billion, up 31 percent, driven mainly by new stores and store remodels. Source
• Operating cash flow rose: Operating cash flow was $716 million, against $275 million a year earlier, with property and equipment expenditures of $1,035 million. Source
• Cash fell after debt reduction: Cash ended at $3,534 million, down from $5,488 million at January 31, after $1,032 million of debt reductions and $516 million of dividends paid. Source
• No buybacks; dividend per share up: No stock was repurchased in the quarter, leaving about $8.3 billion of authorization. Dividend per share rose 1.8 percent. Source
• Trailing return on capital lower: Trailing twelve-month after-tax ROIC was 12.4 percent, against 15.1 percent a year earlier. Business transformation costs reduced it by 0.6 percentage points. Source

Stores and team

• Large-format store count steady: Stores of 170,000 square feet or more numbered 274, up from 273 at January 31 and a year earlier. Source
• Retail square footage increased: Retail square feet totaled 251,483 thousand, up from 248,664 thousand a year earlier, with 2,002 stores in total. Source
• Team size described in company profile: The company described itself as powered by more than 400,000 team members, serving millions of families each week. Source

Figures management reported

Risks management discussed

• External: Management cited an uncertain operating environment and said it is staying disciplined and flexible while continuing to invest. Source
• Financial: Discrete items can be gains or losses and are excluded from Adjusted results; the guidance does not currently reflect any such items. Source

Earlier plans management reported on

• Not stated: Management said it continues to expect net sales growth in every quarter of the year. Source

Other quarters

• Q2 FY2026 earnings call
• Q4 FY2025 earnings call
• Q3 FY2025 results
• Q2 FY2025 results

Summarised with AI from the documents the company filed with the SEC. Every point is checked against the filing before it is shown: management’s own words word for word, figures against the line or table row they come from. A point that fails the check is left out. Source opens the filing at that line.