Target raises outlook after second-quarter results beat estimates

Target Corp. (NYSE: TGT ) stock hit a new 52-week high Wednesday after the retailer reported second-quarter 2026 results that beat Wall Street estimates and raised its full-year outlook.

Net sales rose 5.3% year over year to $26.54 billion, beating the $26.14 billion analyst estimate.

Comparable sales increased 3.8%.

Comparable sales growth reflected a 3.6% increase in traffic.

Store comparable sales rose 2.7%, while digital comparable sales climbed 8.7%.

Same-day delivery sales increased more than 25%.

Earnings And Margins Improve Target reported GAAP diluted earnings of $4.11 per share, up from $2.05 a year earlier.

Adjusted EPS excluding the tariff-refund benefit was $2.46 per share, beating the $2.33 analyst estimate.

Results included $994 million in pretax tariff-refund benefits.

The refunds added $752 million to net earnings and $1.65 per share to earnings.

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 provided a 3.7-percentage-point benefit.

Excluding the refunds, gross margin expanded about 100 basis points year over year.

Sales Mix, Cash Flow And Liquidity Merchandise sales increased 5% to $25.95 billion, while non-merchandise sales jumped 20.1%.

Food and beverage sales totaled $5.99 billion.

Household essentials generated $4.62 billion, apparel and accessories contributed $4.09 billion, and hardlines, or Fun 101, generated $3.89 billion.

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

Trailing 12-month after-tax return on invested capital improved to 15.4% from 14.3%.

Tariff refunds provided a 2.4-percentage-point benefit.

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.

Raises 2026 Outlook Target raised its 2026 net sales growth outlook to about 5% and expects an operating margin of about 6%.

The margin forecast includes about 90 basis points of benefit from second-quarter tariff refunds.

The company raised its sales guidance to $110.02 billion from $108.97 billion, beating the $109.10 billion analyst estimate.

Target raised both GAAP and adjusted EPS guidance to $9.90-$10.90 from $7.50-$8.50.

The GAAP outlook is above the $8.39 analyst estimate, while the adjusted EPS forecast is above the $8.50 estimate.

The updated range includes about $1.65 per share in second-quarter tariff-refund benefits.

Excluding those refunds, the midpoint of the guidance represents a 75-cent increase from the prior outlook.

The forecast excludes any potential future tariff refunds.

Read Also: Target's Comeback Is Real, But Its Stock May Have Run Too Far: Analyst Conference Call Takeaways During the earnings call, management said the second-quarter tariff refund represented the significant majority of IEEPA refunds applied for to date.

However, Target expects additional refunds.

Management said adjusted EPS excluding tariff refunds provides a better measure of the company's underlying earnings base going forward.

Target also acknowledged that its home and apparel businesses remain below expectations.

Management expects improvements in those categories to extend into 2027 and beyond.