Target Corp.: Q2 FY2026 earnings call

What management said about Q2 FY2026, from the documents filed with the SEC on 19 August 2026: press release. Guidance figures: 4 raised, 1 new. The quarter’s numbers.

Read the filing

Key takeaways

• Net sales rose 5.3 percent: Net sales were $26.5 billion, up 5.3 percent. Merchandise sales rose 5.0 percent and non-merchandise sales rose 20.1 percent. Source
• Comparable sales rose on traffic: Comparable sales rose 3.8 percent, driven by a 3.6 percent rise in comparable traffic. Source
• Diluted EPS more than doubled: Diluted EPS was $4.11 against $2.05 a year earlier. The $4.11 included $1.65 from tariff refunds. Source
• Full-year expectations raised: Management raised full-year 2026 expectations after first-half results, as set out in the guidance section. Source
• Refunds added 3.7 points to gross margin: Gross margin rate was 33.7 percent, including 3.7 percentage points from tariff refunds recorded in cost of sales. Source
• Gross margin up about 100 basis points: Excluding refunds, gross margin rose about 100 basis points from 29.0 percent in the prior-year quarter. Source

“Second quarter results build on the encouraging momentum we saw in the first quarter, giving us increasing confidence that our strategy is resonating with our guests and strengthening our leadership position in style, design, and value,”

Michael Fiddelke, Chief Executive Officer of Target

Guidance

What changed from last quarter

• Guidance raised: Full-year net sales growth guidance moved to around 5 percent from around 4 percent in the prior release. Source
• Guidance raised: GAAP and Adjusted EPS guidance moved to $9.90 to $10.90 from $7.50 to $8.50, with the range including refund benefits. Source
• Guidance raised: Operating income margin guidance excluding tariff refunds moved to about 50 basis points above the 4.6 percent 2025 Adjusted rate, from more than 20 basis points. Source
• New: The company recognized $994 million of IEEPA tariff refunds received in the quarter as a reduction of cost of sales. Source

Sales and earnings results

• Net sales rose 5.3 percent: Net sales were $26.5 billion, up 5.3 percent. Merchandise sales rose 5.0 percent and non-merchandise sales rose 20.1 percent. Source
• Comparable sales rose on traffic: Comparable sales rose 3.8 percent, driven by a 3.6 percent rise in comparable traffic. Source
• Two-year sales growth rate accelerated: On a two-year basis, net sales compounded at 2.1 percent a year, 30 basis points faster than the prior quarter. Source
• Diluted EPS more than doubled: Diluted EPS was $4.11 against $2.05 a year earlier. The $4.11 included $1.65 from tariff refunds. Source
• EPS rose 20 percent excluding refunds: Excluding tariff refunds, GAAP and Adjusted EPS rose 20 percent year over year. Source
• Full-year expectations raised: Management raised full-year 2026 expectations after first-half results, as set out in the guidance section. Source

Categories, channels and customers

• All six categories grew: Net sales grew in all six core merchandising categories. Fun 101 rose double digits; Food & Beverage and Beauty rose high single digits. Source
• Digital comparable sales rose 8.7 percent: Digital comparable sales rose 8.7 percent, with same-day delivery up more than 25 percent. Store comparable sales rose 2.7 percent. Source
• Digital share of sales rose: Digitally originated sales were 19.6 percent of merchandise sales, against 18.9 percent a year earlier. Source
• Non-merchandise sales grew over 20 percent: Non-merchandise sales rose over 20 percent. Roundel ad revenue, Target Circle 360 membership and the Target+ marketplace were named as drivers. Source

“While there's still meaningful work ahead, we're encouraged by the progress we're making”

Michael Fiddelke, Chief Executive Officer of Target

Gross margin, costs and profit

• Refunds added 3.7 points to gross margin: Gross margin rate was 33.7 percent, including 3.7 percentage points from tariff refunds recorded in cost of sales. Source
• Gross margin up about 100 basis points: Excluding refunds, gross margin rose about 100 basis points from 29.0 percent in the prior-year quarter. Source
• Lapped markdowns and order cancellation costs: The gain reflects last year's elevated markdowns and purchase order cancellation costs, plus growth in advertising and non-merchandise sales. Source
• SG&A rate rose on compensation: SG&A expense rate rose to 21.6 percent from 21.3 percent, citing higher compensation costs including field-team hours and incentive pay. Source
• Operating income more than doubled: Operating income was $2.6 billion against $1.3 billion a year earlier, with the $994 million refund benefit included. Source
• Net interest expense declined: Net interest expense was $98 million against $116 million, reflecting higher interest income. Source

Traffic and store footprint

• Transactions and ticket both rose: Transactions rose 3.6 percent and average transaction amount rose 0.2 percent. Both had declined in the prior-year quarter. Source
• Store count rose to 2,019: The company operated 2,019 stores at quarter end, up from 1,982 a year earlier, with 253.8 million retail square feet. Source
• Inventory higher than a year earlier: Inventory was $13.2 billion at quarter end, up from $12.9 billion a year earlier. Source

Capital, cash and shareholder returns

• Capital spending rose 27 percent: Capital expenditures were $1.4 billion, up 27 percent, mainly for store remodels and new stores. Source
• Dividends paid rose modestly: Dividends paid were $518 million, up from $509 million, with dividend per share up 1.8 percent. Source
• No buybacks in the quarter: No stock was repurchased in the quarter. Source
• Repurchase authorization remains: About $8.3 billion of repurchase capacity, under the program approved in August 2021, remained at quarter end. Source
• Six-month operating cash flow higher: Six-month cash from operations was $4,519 million, against $2,358 million; property and equipment spending was $2,404 million. Source
• After-tax ROIC rose to 15.4 percent: Trailing twelve-month after-tax ROIC was 15.4 percent, against 14.3 percent a year earlier. Source
• Refunds lifted ROIC by 2.4 points: The tariff refunds added 2.4 percentage points to the trailing twelve-month after-tax ROIC figure. Source

Pricing and value strategy

• Prices cut on over 10,000 items: The company said it lowered prices on more than 10,000 items over the past year while investing in style, design, newness and value. Source

Team and leadership investment

• Investment in team and capabilities: The CEO said Target continues investing in its team and capabilities to drive sustainable, profitable growth over the long term. Source

Coming up, as management said on 19 August 2026

• Future tariff refunds not in guidance: The guidance excludes any later tariff refunds that may be received, so those amounts are not built into the full-year figures. Source

Figures management reported

Risks management discussed

• External: Management describes the operating environment as dynamic and says the company is staying agile within it. Source
• Financial: Guidance does not reflect discrete items such as impairments or severance, which management says vary and may be excluded from Adjusted EPS. Source

Earlier plans management reported on

• Not stated: Management says it is continuing to invest in newness, convenience and an elevated shopping experience. Source
• Not stated: The prior release said the company expected net sales growth in every quarter of the year. This release does not restate that expectation.

Other quarters

• Q1 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.