Target (NYSE: TGT) Doubles EPS to $4.11 in Q2, Raises Full-Year Guidance

Target Corporation (NYSE: TGT) reported Q2 2026 GAAP and adjusted EPS of $4.11, doubling the prior-year figure of $2.05, as net sales rose 5.3% year-over-year to $26.5 billion for the quarter ended August 1, 2026. The results included a $994 million pretax tariff refund benefit that contributed $1.65 to both GAAP and adjusted EPS; excluding that item, EPS grew approximately 20% year-over-year.

Q2 2026 Results

• Net sales of $26.5 billion, up 5.3% from $25.2 billion a year ago, driven by a 3.8% comparable sales increase that reflected a 3.6% rise in comparable traffic.
• GAAP and adjusted EPS of $4.11, versus $2.05 in Q2 2025; the $994 million tariff refund, recognized as a reduction in cost of sales, accounted for $1.65 of the per-share gain.
• Operating income of $2.56 billion, up 94.4% year-over-year, with an operating margin of 9.6% compared with 5.2% a year ago; tariff refunds provided 3.7 percentage points of that margin improvement.
• Gross margin of 33.7% in the quarter, versus 29.0% a year ago; excluding tariff refunds, gross margin expanded approximately 100 basis points over the prior year.
• Capital expenditures of $1.4 billion, 27% higher than the prior-year quarter's $1.1 billion, driven primarily by accelerated investment in store remodels and new stores.

What Drove the Results

The topline beat was broad-based. Digital comparable sales grew 8.7%, led by more than 25% growth in same-day delivery, while store comparable sales increased 2.7%. All six core merchandise categories posted year-over-year sales gains, with the Fun 101 hardlines category delivering double-digit growth and both Food & Beverage and Beauty reporting high single-digit increases. Non-merchandise sales, which include Roundel advertising revenue and Target Circle 360 membership fees, grew more than 20%.

The operating income nearly doubling year-over-year was heavily influenced by the tariff refund. The $994 million benefit, received during the second quarter under the International Emergency Economic Powers Act, flowed directly into gross margin as a cost-of-sales reduction. SG&A expenses rose 6.8% to $5.73 billion, bringing the SG&A rate to 21.6% from 21.3% a year ago, reflecting higher compensation costs including additional field-team hours and elevated incentive compensation, as well as spending on capital projects. Net interest expense declined to $98 million from $116 million, reflecting higher interest income.

For the trailing twelve months through Q2 2026, after-tax return on invested capital was 15.4%, compared with 14.3% for the comparable period a year earlier. The company paid $518 million in dividends during the quarter and did not repurchase any shares, leaving approximately $8.3 billion of capacity under its existing buyback authorization.

Wall Street View

Goldman Sachs analyst Kate McShane, speaking on CNBC, noted a preference for Walmart over Target heading into the print. Following the results, CNBC's Jim Cramer said investors should buy Target on any pullback, citing what he described as a turnaround taking hold. The current analyst consensus, as of August 1, 2026, reflects a mixed picture, and Target raised its full-year guidance above prior expectations.

Investor Takeaway

Target raised its full-year 2026 GAAP and adjusted EPS guidance to a range of $9.90 to $10.90, which includes the $1.65 per-share tariff refund benefit already recognized; excluding that item, the midpoint of the new range reflects a $0.75 increase versus the prior guidance midpoint of $8.00. Full-year net sales growth guidance was lifted one percentage point to a range around 5%, and the full-year operating income margin rate is now expected to be around 6%. Investors weighing the durability of the Q2 result should note that management's guidance explicitly excludes any potential future tariff refunds, meaning the underlying EPS trajectory into the second half depends on whether the 20% organic earnings growth visible in Q2 can be sustained without that one-time benefit. Shares closed at $158.25 on Thursday, August 20, 2026, down -0.47%, while the S&P 500 fell 0.84%.