Target Stock Hits 52-Week High on Retail Recovery, Raises Full-Year Guidance

Target Corp. shares hit a 52-week high on Wednesday after the retailer posted better-than-expected Q2 2026 earnings and raised its full-year guidance.

Net sales rose 5.3% year-over-year to $26.54 billion, beating analyst estimates of $26.14 billion. Comparable sales increased 3.8%.

Comparable sales growth was driven by a 3.6% increase in traffic. Store comparable sales rose 2.7%, while digital comparable sales climbed 8.7%. Same-day delivery sales grew more than 25%.

Earnings and Margin Improvement

Target reported GAAP diluted EPS of $4.11, up from $2.05 in the prior-year period. Adjusted EPS came in at $2.46, exceeding analyst expectations of $2.33.

Results included a $994 million pretax tariff refund benefit. The refund added $752 million to net income, or $1.65 per share.

Operating income rose to $2.56 billion from $1.32 billion. Operating margin expanded to 9.6% from 5.2%.

Gross margin increased to 33.7% from 29%. Tariff refunds contributed 3.7 percentage points. Excluding refunds, gross margin expanded approximately 100 basis points year-over-year.

Sales Breakdown, Cash Flow, and Liquidity

Merchandise sales grew 5% to $25.95 billion, while non-merchandise sales increased 20.1%.

Food and beverage sales reached $5.99 billion. Home essentials generated $4.62 billion in revenue. Apparel and accessories contributed $4.09 billion, and hardlines produced $3.89 billion.

Capital expenditures rose 27% to $1.4 billion, primarily reflecting investments in store remodels and new store openings.

After-tax return on invested capital over the trailing 12 months improved to 15.4% from 14.3%. Tariff refunds contributed 2.4 percentage points.

Operating cash flow for the first six months totaled $4.52 billion. Target ended the quarter with $5.41 billion in cash and equivalents, and $14.22 billion in long-term debt and other borrowings.

Raised 2026 Guidance

Target raised its 2026 net sales growth guidance to approximately 5%, with expected operating margin of approximately 9.6%. The gross margin forecast includes approximately 90 basis points of benefit from Q2 tariff refunds.

The company lifted its sales guidance to $110.02 billion, up from $108.97 billion previously, exceeding analyst estimates of $109.1 billion.

Target raised its GAAP and adjusted EPS guidance to $9.90-$10.90, up from $7.50-$8.50 previously. The GAAP guidance is above analyst expectations of $8.39, and the adjusted EPS forecast exceeds the $8.50 estimate.

The updated range includes approximately $1.65 per share of benefit from Q2 tariff refunds. Excluding these refunds, the midpoint of guidance increased by 75 cents versus the prior outlook. The forecast does not include any potential future tariff refunds.

Conference Call Highlights

During the earnings call, management said the Q2 tariff refunds represent the vast majority of IEEPA refunds claimed to date. However, Target expects to receive additional refunds.

Management noted that adjusted EPS excluding tariff refunds better reflects the company's underlying earnings power.

Target acknowledged that its home and apparel businesses remain below expectations. Management expects improvement in these categories to extend into 2027 and beyond.

Kids' basics products posted double-digit growth, while the Art Class youth brand grew 50%. Stores featuring the Target Decor home refresh also outperformed.

High-margin growth businesses remained strong. Roundel total billings grew nearly 20%, Target Marketplace gross merchandise value increased more than 40%, and Target Circle 360 membership revenue grew over 40%.

Target expects full-year capital expenditures of approximately $5 billion. Management also expects to regain the ability to resume share repurchases in the second half of the year, subject to operating performance, cash generation, and credit rating considerations.

TGT Stock Performance

Target shares closed up 5.47% at $160.82 on Wednesday, trading at a 52-week high.