Target's second-quarter net earnings reached $1.877 billion on tariff refunds and underlying sales growth of 3.8 percent
The retailer reported second-quarter net earnings of $1.877 billion, with $994 million in tariff refunds contributing $752 million to net earnings, while comparable sales grew 3.8 percent and it raised full-year guidance.
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Target reported second-quarter 2026 results on August 19, with net earnings of $1.877 billion, compared with the prior year's $935 million. Diluted earnings per share reached $4.11, up from $2.05 in the prior year. The retailer received $994 million in tariff refunds during the quarter related to International Emergency Economic Powers Act tariffs, which contributed $752 million to net earnings and $1.65 to diluted earnings per share.
Excluding the tariff benefit, Target's underlying operational performance shows material improvement. Excluding tariff refunds, diluted earnings per share grew 20 percent year-over-year, and the company's gross margin rate expanded approximately 100 basis points over the prior year's 29.0 percent rate.
Comparable sales and traffic shift into positive territory
Second-quarter comparable sales grew 3.8 percent, driven by a 3.6 percent increase in comparable traffic. Store comparable sales grew 2.7 percent while digital comparable sales grew 8.7 percent, with same-day delivery sales growing more than 25 percent in the quarter. Net sales reached $26.5 billion, up 5.3 percent from the prior year, while six-month net sales were $51.982 billion, representing 6.0 percent growth. Six-month comparable sales grew 4.7 percent, compared with a decline of 2.8 percent in the prior year.
Merchandise categories driving growth at different rates
Food & Beverage merchandise sales were $5.991 billion in the quarter against $5.588 billion in the prior year and achieved high single-digit growth. Fun 101 (Hardlines) merchandise sales were $3.894 billion versus $3.522 billion prior year and achieved double-digit growth. Beauty sales reached $3.639 billion compared with $3.396 billion a year earlier, also posting high single-digit growth. Overall merchandise sales increased 5.0 percent in the quarter while non-merchandise sales increased 20.1 percent, with advertising revenue reaching $279 million against $217 million a year earlier.
Target reduced prices on more than 10,000 items over the past year. Net interest expense fell to $98 million from $116 million in the prior year.
Excluding tariff benefits from guidance updates
Target updated its full-year 2026 net sales growth guidance to a range around 5 percent, one percentage point higher than prior guidance. For diluted earnings per share, the company updated its range to $9.90 to $10.90, which includes the second-quarter tariff refund benefits of approximately $1.65. Excluding tariff refunds, the midpoint of Target's updated earnings per share guidance range reflects a $0.75 increase versus prior guidance of $7.50 to $8.50.
Operating income margin guidance for the full year sits in a range around 6 percent, including approximately 90 basis points of benefit from second-quarter tariff refunds. Excluding tariff refunds, Target's full-year operating income margin rate is expected to be in a range around 50 basis points higher than last year's adjusted operating income margin rate of 4.6 percent.
Store growth and capital deployment
Target added 24 stores during the first half of 2026, reaching 2,019 stores as of August 1 from 1,995 stores as of January 31. Retail square footage increased to 253.826 million square feet from 250.518 million square feet. Capital expenditures in the second quarter were $1.4 billion, 27 percent higher than the prior year.
Target did not repurchase stock in the second quarter and had approximately $8.3 billion of remaining capacity under its stock repurchase program as of quarter-end. Dividends paid during the quarter were $518 million compared with $509 million in the prior year, reflecting a dividend per share increase of 1.8 percent.