Tariff refunds of nearly $1B help Target beat Street in strong Q2
Target Corp. cited the return of money it paid in tariffs and the continuing success of its turnaround program as helping drive impressive second quarter results.
The discount giant reported net earnings of $1.88 billion, double $935 million from the same quarter in fiscal 2025. Adjusted earnings per share rose to $4.11 from $2.05, significantly beating Wall Street estimates of $2.33 per share.
Target credited its receipt of $994 million in pretax refunds on tariffs paid on imported products under the International Emergency Economic Powers Act, or IEEPA, as boosting its net earnings by $752 million and its adjusted EPS by $1.65. In February 2026, the U.S. Supreme Court ruled that the Trump Administration was not given the authority to unilaterally impose tariffs by IEEPA.
Net sales totaled $26.54 billion, up about 5% from $25.21 billion year-over-year. According to Target, this growth reflects a 5% increase in merchandise sales across all six core merchandising categories, with double-digit growth in Fun 101 and high single-digit growth in food & beverage and beauty, and a 20.1% increase in non-merchandise sales.
Target credited revenue from its Roundel retail media network, Target Circle 360 paid membership program, and Target+ online marketplace as driving non-merchandise revenue.
Comparable sales grew 3.8% in the second quarter, reflecting a comparable store sales increase of 2.7% and comparable digital sales increase of 8.7%, which Target said were led by more than 25% growth in same-day delivery. Analysts had predicted a comparable sales increase of 2.4%.
"Second quarter results build on the encouraging momentum we saw in the first quarter, giving us increasing confidence that our strategy is resonating with our guests and strengthening our leadership position in style, design, and value," said Michael Fiddelke, CEO of Target. "Over the past year, we've reduced prices on more than 10,000 frequently purchased items as part of our commitment to delivering outstanding value every day, while continuing to invest in newness, convenience and an elevated shopping experience.”
[READ MORE: Target Q1 tops estimates with strongest sales gains in four years]
Target raises guidance
Based on second quarter performance, Target has the following updated expectations for the second half of 2026:
- Full-year net sales growth in a range around 5%, one percentage point higher than the prior guidance range.
- Full-year 2026 operating income margin rate in a range around 6 percent, including approximately 0.9 percentage points of benefit from second quarter tariff refunds. Excluding tariff refunds, full-year operating income margin rate is expected to be in a range around 0.5 percentage points higher than last year's adjusted operating income margin rate of 4.6%.
- An updated adjusted EPS guidance range of $9.90 to $10.90, which includes second quarter tariff refund benefits of approximately $1.65. Excluding tariff refunds, the midpoint of the guidance range reflects a $0.75 increase versus prior guidance of $7.50 to $8.50.
Headquartered in Minneapolis, Target operates more than 2,000 U.S. stores and online.
