Target executives cited progress with its home merchandising update as a contributor to the retailer’s overall second-quarter gains.
The home operation remains a work in progress, as the company looks to build momentum in the category, Target executives noted.
Target also reported the imminent rollout of the dedicated category presentation, Target Beauty Studios.
For the second quarter, net income was $1.88 billion, or $4.11 per diluted share, versus $935 million, or $2.05 per diluted share, in the year-before period, both GAAP and adjusted. Target pointed out that the most recent results included a $994 million pretax tariff refund benefit, or $1.65 per diluted share. With the refunds excluded, earnings per diluted share still increased 20% year-over-year.
A Zacks Investment Research analyst consensus estimate looked for earnings per adjusted diluted share of $2.30 and revenues of $26.13.
Comparable sales grew 3.8% year over year in the quarter, driven by a 3.6% increase in comparable traffic, the company stated. Digital comps gained 8.7%.
Net sales were $26.54 billion versus $25.21 billion in the year-prior period, reflecting a 5% increase in merchandise sales and a 20.1% increase in non-merchandise sales, including media, membership, and marketplace revenue.
Operating income was $2.56 billion versus $1.32 billion in the year-earlier quarter, the company reported.
As for guidance, Target maintained it was updating its outlook, which now has full-year net sales growth in a range around 5%, one percentage point higher than the prior guidance range; and GAAP and adjusted EPS in the range of $9.90 to $10.90, which includes second-quarter tariff refund benefits of $1.65. With the tariff refunds excluded, the midpoint of the guidance range reflects a 75-cent increase versus prior guidance of $7.50 to $8.50, the company observed.
In a conference call, Michael Fiddelke, Target CEO, said the company has enjoyed encouraging momentum in the four key priority areas it has established: leading with merchandising authority, elevating the guest experience, accelerating technology and strengthening Target teams and communities.
In home, he said, Target had, as part of the company’s overall merchandising update, replaced about three quarters of its decorative accessories assortment. Fiddelke said Target is motivated to continue improving performance in the home business and in apparel.
“Flattish growth in apparel and home isn’t what we strive for over time, and the earnings power potential of those two high-margin categories returning to a place of more sustained growth is, I think, something we look forward to,” he said.
Cara Sylvester, company executive vice president and chief merchandising officer, said in the call that Target would “continue our work to strengthen our home offerings with significant assortment changes ahead in kids home and bedding.” She said that home department performance isn’t yet where the company wants it to be, with the work in the category continuing into 2027 and beyond. She added that changes to home accessories and enhancements to the in-store shopping experience have led to better performance in the department.
“Those proof points give us confidence that we’re on the right path,” Sylvester said. “We’re going to continue to execute with discipline and work through our plans in those businesses for the balance of this year and into next year.”
Lisa Roath, Target executive vice president and COO, added, “As we head into 2027, we’ve got big changes coming in our kitchen and dining. The themes, I would say: sharper curation, really compelling value but leading with that style, design and value across the board, as well as elevating the experience.”
Roath noted that Target is preparing a major beauty initiative in Target Beauty Studio. Construction crews have been routing fixtures, while Target staffers have been training dedicated beauty advisors, she said, “all to help our team deliver an elevated guest experience in beauty. The new spaces are under construction as we speak, and we are excited to unveil these new offerings at more than 600 stores beginning next month.”
In announcing the financial results, Fiddelke said, “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. 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. While there’s still meaningful work ahead, we’re encouraged by the progress we’re making and remain focused on executing with discipline, staying agile in a dynamic operating environment and investing in our team and capabilities to drive sustainable, profitable growth over the long term.”
