Target boosts outlook after Q2 rebound

Target (TGT) reported net sales of $26.54 billion for the second quarter ended Aug. 1, 2026, a 5.3% increase from the prior year. Comparable sales rose 3.8%, driven by a 3.6% increase in comparable traffic. The company also delivered growth in digital comparable sales, which climbed 8.7% in the quarter, supported by more than 25% growth in same-day delivery services.

Net sales increased across all six of Target’s (TGT) core merchandising categories compared with a year earlier. Fun 101 posted double-digit net sales growth, while Food & Beverage and Beauty delivered high single-digit gains. The broad-based category performance contributed to the overall improvement in the company’s top line during the period.

Second-quarter results were significantly influenced by a pre-tax benefit of $994 million from International Emergency Economic Powers Act tariff refunds. Target (TGT) recognized these refunds as a reduction of cost of sales, and they were reflected in both gross margin and operating income. The refunds contributed $752 million to net earnings for the quarter and added $1.65 to both GAAP and adjusted diluted earnings per share.

Including the tariff refund benefit, Target reported GAAP diluted EPS of $4.11 for the quarter, compared with $2.05 a year earlier. The gross margin rate reached 33.7%, with approximately 3.7 percentage points of that rate attributed to the tariff refunds. These factors together produced a marked year-over-year improvement in profitability metrics.

Following the second-quarter performance and the recognition of tariff refunds, Target raised its full-year outlook for fiscal 2026. The company now expects net sales growth of about 5% for the year, an increase of one percentage point from its prior forecast. Management also updated its earnings guidance to reflect the impact of the refund and current operating trends.

Target now projects full-year EPS of approximately $9.90 to $10.90 including the tariff refunds. On an excluding-refunds basis, the company cited an EPS range of about $8.25 to $9.25. This compares with a previous outlook of $7.50 to $8.50, indicating improved expectations for underlying performance even without the one-time benefit.

Within its merchandising and fulfillment operations, Target highlighted strength in both store and digital channels. Same-day delivery saw growth of more than 25%, supporting the 8.7% increase in digital comparable sales. Net sales growth was positive across all core categories, underscoring the contribution from a diversified product mix.

Chief Executive Officer Michael Fiddelke described the quarter as encouraging while noting that important work remains. The combination of higher sales, category-wide strength, and the tariff refund benefit underpins a more optimistic outlook for the remainder of the fiscal year, while acknowledging that some of the earnings uplift reflects a one-time factor.