Target reports 5.3 percent sales growth in Q2 as apparel and core categories expand

US retail giant Target Corporation (Target) released its financial results for the second quarter ended August 1, 2026, delivering top-line growth across physical and digital channels alongside significant bottom-line expansion.

Total net sales reached 26.54 billion dollars, representing a 5.3 percent increase compared to the prior-year period. Comparable sales grew 3.8 percent, driven by a 3.6 percent increase in store traffic. Digital comparable sales expanded 8.7 percent, bolstered by growth exceeding 25 percent in same-day delivery services.

Apparel and accessories generated 4.09 billion dollars in net sales during the quarter. Merchandise growth across core product categories was accompanied by strong non-merchandise performance, which grew over 20 percent due to expansion in advertising revenue through Roundel, marketplace growth, and subscription services.

Tariff refunds boost operating earnings and margin expansion

Operating income for the second quarter stood at 2.56 billion dollars, a 94.4 percent increase from 1.32 billion dollars in the second quarter of 2025. Net earnings reached 1.88 billion dollars, while diluted earnings per share (EPS) doubled to 4.11 dollars from 2.05 dollars in the prior-year period.

Results were significantly impacted by 994 million dollars in pretax tariff refund benefits recognized as a reduction of cost of sales under the International Emergency Economic Powers Act (IEEPA). The tariff refunds contributed 752 million dollars to net earnings, representing 1.65 dollars of diluted EPS and providing a 3.7 percentage point benefit to the gross margin rate, which closed at 33.7 percent. Excluding the tariff refunds, second quarter gross margin expanded approximately 100 basis points year-over-year (YoY).

Capital allocation and updated outlook

Target invested 1.4 billion dollars in capital expenditures during the quarter, a 27 percent increase YoY, focused primarily on store remodels and network expansion. The retailer ended the quarter operating 2,019 stores across the US.

The group paid 518 million dollars in dividends, marking a 1.8 percent increase per share. No share repurchases were executed during the second quarter, leaving 8.3 billion dollars in remaining capacity under its authorized buyback program.

Target updated its operational outlook for full-year 2026. Full-year net sales are Expected to grow around 5 percent, raising previous targets by one percentage point.

Operating income margin rate is projected around 6 percent, including approximately 90 basis points from second quarter tariff refunds. Excluding these benefits, the operating margin is anticipated to improve approximately 50 basis points over the 2025 adjusted margin rate of 4.6 percent. Diluted EPS is expected to a range between 9.90 dollars and 10.90 dollars. Excluding the 1.65 dollars tariff refund benefit, the midpoint represents a 0.75 dollar increase over prior guidance.