After cutting prices and overhauling its merchandise department, retailer Target (TGT) did its part for the second quarter in a row to signal that its worst days in 2024 and 2025 are in the rearview mirror. The retailer delivered another strong result compared to estimates. Sales increased across all merchandise departments, led by beauty and food. Store traffic increased. The company even raised its full-year sales and profit outlook. “We’re encouraged,” Target CEO Michael Fiddelke told Yahoo Finance in an interview. “We put together a plan for the year that included a lot of changes – more changes to what we were selling and how we were going to sell it than in the last decade. And a couple of quarters later, it’s great to see a strong guest response to some of the places we’re making changes.” “We still have a lot of work ahead of us,” Fiddelke added, “and the goal is not a couple of strong quarters. The goal is years of sustained revenue growth. So we’ll turn the page on this one and get back to work.” School supplies are displayed at a Target store on August 13, 2026 in downtown Brooklyn, New York City. (Michael M. Santiago/Getty Images) · Michael M. Santiago via Getty Images Since early 2026, Target has moved quickly to rewrite its merchandising mistakes to improve traffic to its stores and online. It has expanded wellness offerings, added 3,000 beauty products across 60 new brands, reinstated 75% of home décor accessories, accelerated food and beverage innovation and introduced a back-to-school range that is more than 50% new, Jefferies analyst Corey Tarlowe said in a recent note. Tarlowe said this represents one of the most extensive assortment updates in years and is beginning to translate into improved traffic trends. The veteran Target bull believes the market may be underestimating the durability of traffic benefits from the big-box retailer’s “merchandising reset.” The company also reduced prices on 10,000 items, mostly food products, over the past year to be more competitive with companies like Walmart (WMT) and Kroger (KR). Fiddelke said more price cuts are on the way. “We’re not done yet, so you can expect us to continue to lean on smart pricing investing. I think some of the value that you were describing and being on our shelves for back to school sums it up,” Fiddelke said, adding that he’s “encouraged” by how the back-to-school shopping season has started. Q2 Earnings Analysis Net Sales: +5.3% YoY to $26.5B vs. $25.5B estimates. Gross profit margin: 33.7% versus 29% a year ago and estimates of 28.5%. Diluted earnings per share: +100% year over year to $4.11 vs. estimates of $2.32. Comparable sales: +3.8% year over year vs. +2.43% estimate (last year comparable sales -1.9%). What else caught our attention? Second quarter capital expenditures of $1.4 billion were 27% higher than last year, driven primarily by increased investments in remodels and new stores. The company did not buy back any of its shares in the first quarter. The number of transactions increased 3.6% in the quarter and the average transaction amount increased 0.2%. Target expects full-year sales to increase about 5%, up from about 4% previously. Full-year earnings per share are now projected at the “high end” of the range of $9.90 to $10.90, compared to previous guidance at the high end of the range of $7.50 to $8.50, fiscal 2025 earnings per share of $7.57 and estimates of $8.48 per share. Excluding fee refunds, the midpoint of the guidance range reflects an increase of $0.75 versus prior guidance. Brian Sozzi is the executive editor of Yahoo Finance, host of the Power Players with Brian Sozzi podcast, and a member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram and LinkedIn. Story tips? Send an email to brian.sozzi@yahoofinance.com. Click here for an in-depth analysis of the latest stock market news and events influencing stock prices. Read the latest financial and business news from Yahoo Finance.
