Target Q2 Earnings Call Highlights Higher Sales Outlook and Traffic

In the second quarter, the company reported earnings per share of $2.46, beating the Zacks Consensus Estimate of $2.30. Revenues of $26.54 billion topped the Zacks Consensus Estimate of $26.13 billion.

TGT Lifts the Full-Year Outlook

CFO James Lee said Target now expects fiscal 2026 net sales growth around 5%, up 1 percentage point.

Lee stated the company expects its operating margin, excluding tariff refunds, to run around 50 basis points above the 2025 adjusted rate of 4.6%.

He also raised GAAP and adjusted EPS guidance to $9.90-$10.90 from $7.50-$8.50. The new range includes $1.65 of second-quarter tariff-refund benefits, while the midpoint excluding refunds is 75 cents above the prior guidance midpoint.

Target's Traffic Gains Broaden

Lee informed that second-quarter net sales rose 5.3% to $26.5 billion, while comparable sales increased 3.8%, driven by a 3.6% traffic gain. 

CEO Michael Fiddelke said strength was broad across the quarter, categories and income brackets. In response to an Oppenheimer analyst, Fiddelke identified traffic as one of management's clearest indicators of sustainable long-term growth.

Chief merchandising officer Cara Sylvester said Food & Beverage, Beauty and Fun101 were among the categories where recent changes produced stronger guest engagement and sales momentum.

TGT Deepens Merchandising Resets

Sylvester said Target's seven priority merchandising areas represent about 50% of sales and are receiving disproportionate investment. Growth was strongest where the company made major changes.

Sylvester said the Food reset covered nearly half of center-store grocery, while Fun101 shifted space toward toys, collectibles, wearable technology and other culture-driven categories. Snack sales were running more than 15% above last year after the transition.

She also said Target Beauty Studio will launch in more than 600 stores with dedicated Beauty Advisers and an elevated shopping experience.

Target Pushes Value and Better Execution

Fiddelke said Target has lowered prices on more than 10,000 items over the past year and plans additional reductions, maintaining value as a core part of the strategy.

Sylvester said inventory reliability reached multiyear highs, while the company fulfilled nearly 30% more same-day and next-day units than a year earlier.

COO Roath said Target opened 17 stores in the quarter and has more than 100 remodels underway. Lee said Target expects to have capacity to resume share repurchases in the back half.

TGT Faces Scrutiny on Home and Apparel

A JPMorgan analyst asked whether slower progress in home and apparel reflected longer product lead times. Fiddelke agreed those categories move more slowly, while Sylvester said bedding, kids' home and bath changes are due in the third quarter, with kitchen and dining changes planned for 2027.

An Oppenheimer analyst also pressed management on why stronger traffic had not produced better home and apparel results. Sylvester said Target was not satisfied with either category, although selected resets were generating better guest response.

A Morgan Stanley analyst asked how far Target had progressed through its broader merchandising reset. Fiddelke declined to frame the work as a fixed percentage and said changes will continue through 2027, 2028 and beyond.

Target Keeps a Long-Term Transformation Lens

Fiddelke stated Target is only two quarters into the first year of its refreshed plan and remains focused on sustained, profitable top-line growth rather than a short run of stronger quarters.

Roath emphasized consistency in store execution and inventory availability, while Sylvester said category work will continue in stages as Target refines assortments, value and presentation.

Zacks Signals Are Favorable for TGT

TGT carries a Zacks Rank #2 (Buy), with Value Score, Growth Score and Momentum Score of Band and VGM Score of A. Zacks Style Score methodology favors combining a Zacks Rank #1 (Strong Buy) or 2 with A or B Style Scores, while the VGM Score blends value, growth and momentum characteristics. You can see the complete list of today’s Zacks #1 Rank stocks here.

The current setup therefore reflects favorable Zacks Rank and Style Score signals, but those indicators are not static. The Zacks Rank can change as earnings estimates are revised following the just-reported results.

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