stockrowWhat it does
Target is a U.S. retailer that sells everyday essentials, groceries, apparel, home goods, beauty products, and other general merchandise to customers it calls guests. It aims to combine discounted prices with a curated, multi-category assortment centered on design, style, and value.
It operates as one reportable segment. Customers can buy in stores, through digital channels, and through the Target Plus marketplace, which includes merchandise sold by Target and third parties. Stores are both shopping locations and fulfillment hubs: they support in-store purchases, shipping to guests, Order Pickup, Drive Up, and Same-Day Delivery.
Most stores carry general merchandise and groceries. Larger stores generally offer a full grocery line alongside general merchandise. The assortment includes national brands, owned and exclusive brands, limited-time design partnerships, and shop-in-shop experiences. Apple, Levi’s, and Ulta Beauty are among its shop-in-shop partners; the Ulta Beauty commercial operating agreement is scheduled to end when it expires in August 2026.
Target was founded in 1902 and is headquartered in Minneapolis. Michael J. Fiddelke has been chief executive officer since February 2026. The company employed 415,000 people as of January 31, 2026.
How it makes money
The vast majority of Target’s revenue comes from merchandise sales. Food & beverage was its largest disclosed merchandise category in FY2026, at $24.1 billion and 34.0% of revenue. Apparel and accessories generated $15.7 billion, while home furnishings and decor generated $15.6 billion. Beauty generated $13.2 billion.
Target also earns revenue outside merchandise sales. Roundel provides advertising services to vendors, other third parties, and marketplace sellers. Other sources include Target Circle Card profit sharing, Target Plus marketplace activity, and membership fees. Target Circle has a free membership with deals and rewards, Circle Card offerings with a 5 percent discount on nearly all purchases and shipping and return benefits, and the paid Target Circle 360 membership with same-day delivery eligibility, shipping, returns, and member deals.
Its pricing model is based on discounted merchandise prices, supported by vendor income such as volume rebates, promotions, advertising activities, and markdown allowances. Category margins differ by merchandise type. In FY2026, advertising revenue was $915.0 million; credit-card profit-sharing revenue was $522.0 million.
FY2026 net sales were $104.8 billion. In Q2 2026, net sales were $26.5 billion. During that quarter, Roundel gross billings grew nearly 20%, Target Plus Marketplace GMV grew more than 40%, and Target Circle 360 membership revenue increased by over 40% as compared to last year.
| Product or service | Revenue, FY2025 | Share | Change on the year |
|---|---|---|---|
| Food & beverage | $23.8 billion | — | — |
| Apparel And Accessories | $16.5 billion | — | — |
| Home Furnishings and Decor | $16.7 billion | — | — |
| Beauty | $13.2 billion | — | — |
| Advertising revenue | $649.0 million | — | — |
| Other | $521.0 million | — | — |
| Credit card profit sharing | $576.0 million | — | — |
| Other merchandise sales | $217.0 million | — | — |
Customers and how it sells
Target serves U.S. households and describes its intended audience as busy families. Its customer proposition combines essentials and groceries with discretionary merchandise such as apparel, home furnishings, beauty, and entertainment-oriented assortments. The Target Circle program is designed to encourage loyalty and shopping frequency through free deals and rewards, card-linked discounts, and a paid delivery membership.
Nearly all sales are generated in the United States, where the vast majority of property and equipment is also located. The company has administrative operations in the U.S. and Bangalore, India, while sourcing offices are located in 13 countries, predominantly in Asia and Central America.
Customers can shop stores, websites, and mobile applications. Stores remain the central customer and fulfillment channel: they fulfilled more than 97 percent of total merchandise sales in each of the last three years. Digital orders can be picked up at stores, delivered the same day, shipped from stores or supply-chain facilities, or supplied by vendors and third-party distributors. In Q2 2026, digital comparable sales increased 8.7%, led by growth of more than 25% in same-day delivery.
| Segment | Revenue, FY2025 | Share | Change on the year |
|---|---|---|---|
| Reportable Segment | $106.6 billion | — | — |
Suppliers and costs
Target sources merchandise globally and operates sourcing offices in 13 countries, particularly for owned brands. Approximately one-half of its merchandise is sourced outside the United States, with China the largest country of origin for imported goods. Target is the importer of record for most owned and exclusive merchandise and certain national-brand goods, making it responsible for customs compliance, duties, and fees.
Most merchandise moves through Target distribution centers to stores, using common carriers. Vendors or third-party distributors ship certain food and beverage items and other products directly to stores. Key operating costs include merchandise costs, duties, freight and supply-chain costs, store and headquarters labor, technology, occupancy, markdowns, and shrink.
Target uses supplier negotiations, sourcing diversification, assortment and pricing decisions, and permitted customs valuation methods to mitigate tariffs. It also receives vendor income, principally from rebates, promotions, advertising activities, and markdown allowances, generally recorded as a reduction of cost of sales. Its FY2026 gross margin rate was 27.9%.
- Revenue$104.8B
- Cost of revenue−$75.5B
- Selling, general and administrative−$21.5B
- Other operating costs−$2.6B
- Operating income$5.1B
Competitive position
Target competes across omnichannel retail rather than against only one store format. Its competitive set includes department stores, off-price general-merchandise retailers, wholesale clubs, category-specific retailers, drug stores, supermarkets, direct-to-consumer brands, online marketplaces, and other retail commerce formats. Competition concerns price, assortment, convenience, fulfillment choices, shopping experience, and the ability to differentiate.
The company uses stores as local fulfillment hubs and offers Order Pickup, Drive Up, Same-Day Delivery, shipping, and digital shopping. It also uses owned and exclusive brands, national brands, design partnerships, and store and digital assortments to differentiate its offer. Approximately thirty percent of merchandise sales come from owned and exclusive brands. Its Target, Expect More. Pay Less., and Bullseye Design trademarks are registered in the U.S.
No individual competing companies are identified.
Our reading: Target’s store-based fulfillment network is a meaningful operating advantage because stores fulfill more than 97 percent of merchandise sales, supporting convenience and reduced fulfillment cost; it remains dependent on keeping its assortment, value, and execution differentiated. [item1]
Our reading: Its owned and exclusive brands, partnerships, and trademarks provide a moderate source of differentiation, but the company competes across many retail formats and says competitive position largely depends on providing compelling value. [item1]
Growth opportunities
Target’s growth plan centers on merchandise authority, guest experience, technology, and team and community capabilities. It seeks to grow merchandise sales through comparable sales and new stores, with comparable sales expected to drive a significant portion of total sales growth. The company expects to open about 30 new stores during 2026 and expects approximately $5 billion of 2026 capital expenditures for stores, remodels, supply chain, technology, and new stores.
Digital fulfillment, Target Plus, Roundel, and Target Circle 360 are additional growth areas. In Q2 2026, Target Plus Marketplace GMV grew more than 40%, Target Circle 360 membership revenue increased by over 40%, and Roundel gross billings grew nearly 20% from the prior year. The company is also investing in technology for personalization, inventory management, merchandising, planning, and digital experiences.
Management said its seven strategic priority areas represent about 50% of sales and are expected to contribute more to growth over time. It has lowered prices on more than 10,000 items over the past year while changing store layouts and assortments. In Q2 2026, traffic rose 3.6% from the prior year, store comparable sales grew 2.7%, and digital comparable sales rose 8.7%. Management said home is a multi-year journey, while apparel and home performance remains below expectations.
- $106.0BFY2022
- $109.1BFY2023
- $107.4BFY2024
- $106.6BFY2025
- $104.8BFY2026
Structural risks
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Target’s competitive position depends on differentiating its offer and providing compelling value as consumers migrate to digital channels and seek multiple fulfillment options.
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Consumer confidence, macroeconomic conditions, and selective discretionary spending can affect sales, particularly higher-margin merchandise.
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About one-half of its merchandise is sourced outside the U.S., exposing it to tariffs, trade-policy changes, supplier relationships, supply-chain disruption, commodity costs, transport constraints, and customs obligations.
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Technology systems support operations throughout the business and may be damaged or interrupted by outages, third-party failures, malicious attacks, security breaches, program transitions, or implementation errors.
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Capital investments and transformation initiatives may not deliver appropriate returns. Transformation work has also disrupted the guest experience, and management said the work remains far from complete.
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Target relies on a large, global, changing workforce that includes team members, contractors, and temporary staffing.
Bottom line
Our reading
Our reading: Target is a single-segment U.S. retailer built around a broad mix of essentials and discretionary merchandise, with stores serving both as shopping locations and as the principal fulfillment network. [item1]
Our reading: Its sales base faces pressure from cautious discretionary spending, tariffs, and broad omnichannel competition, while advertising, marketplace activity, memberships, technology investment, store changes, and new locations are intended to add growth sources. [item7, call_prepared]
Our reading: Execution in home, apparel, value, inventory availability, and the store experience is central because management says home and apparel require further work and transformation remains incomplete. [facts, call_qa]