According to Joseph Feldman, Senior Managing Director and Assistant Director of Research at Telsey Advisory Group, Target's turnaround strategy appears to be working. Feldman noted that several factors are contributing to bringing shoppers back to the stores, including stronger customer traffic, sharper merchandising efforts, and a revitalized food strategy. He emphasized that these positive changes are occurring independently of the tariff refunds the company recently received.
While Target has shown promising results for two consecutive quarters, with comparable sales increasing by 3.8% and adjusted EPS rising by 100% year-over-year to $4.11 in Q2 2026, CFO Michael Fiddelke cautioned that significant work remains. The second quarter results were notably boosted by $994 million in pre-tax tariff refunds, contributing $1.65 to the EPS. Excluding these refunds, the gross margin rate still expanded by approximately 100 basis points over the prior year.
Target's net sales grew 5.3% year-over-year, reaching $26.5 billion in Q2 2026, with comparable traffic increasing by 3.6%. The company has focused on a differentiated retail experience, investing in style, design, and value, including lowering prices on over 10,000 items in the past year. Digital comparable sales saw an 8.7% increase, driven by more than 25% growth in same-day delivery. Non-merchandise sales, including Roundel ad revenue, Target Circle 360 membership, and the Target+ marketplace, also grew over 20%. Despite these gains, analysts like Morningstar still view Target's shares as potentially overvalued, noting its midmarket positioning leaves it vulnerable to competitors.
