Latest quarter
Target reported Q2 FY2027 revenue of $26.5 billion, above the consensus estimate of $26.1 billion. On the consensus basis, adjusted EPS was $2.46, above the $2.30 estimate. Target separately reported GAAP and adjusted EPS of $4.11, including $1.65 per share from tariff refunds.
The company said comparable sales rose 3.8 percent, with traffic up 3.6 percent and the average transaction amount up 0.2 percent. Its filing attributed 20.1 percent growth in non-merchandise sales primarily to its Roundel digital advertising business.
Gross margin rose to 33.7% from 29.0% a year earlier. Target attributed the increase partly to tariff refunds, lower purchase order cancellation costs and growth in advertising and other revenue. The company reported $994 million in tariff refunds within operating income; excluding the refunds, operating income grew approximately 19 percent.
Target reported quarterly free cash flow of $2.4 billion, compared with $1.0 billion a year earlier.
| Q2 FY2027 | Q2 FY2026 | Change | |
|---|---|---|---|
| Revenue | $26.5 billion | $25.2 billion | 5.27% |
| Diluted EPS | $4.11 | $2.05 | 100.5% |
| Gross margin | 33.7% | 29.0% | 4.7 percentage points |
| Operating margin | 9.65% | 5.22% | 4.4 percentage points |
| Free cash flow | $2.4 billion | $1.0 billion | 141.2% |
| Against the consensus | Reported | Consensus | Result |
|---|---|---|---|
| Adjusted EPS | $2.46 | $2.30 | Beat by 6.96% |
| Revenue | $26.5 billion | $26.1 billion | Beat by 1.57% |
Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.
What management said on the call
CEO Michael Fiddelke said Target’s refreshed strategy focuses on merchandising, the guest experience, technology, and its team and communities. He said customers were visiting more often and that the company had made layout changes across nearly half of its center-store grocery assortment and replaced nearly three quarters of its decorative accessories assortment in home.
CFO Jim Lee said store comparable sales grew 2.7% in the quarter, while digital comparable sales rose 8.7%, led by more than 25% growth in same-day delivery. He also pointed to growth in food and beverage and beauty, as well as nearly 20% growth in Roundel gross billings from a year earlier.
Asked about pricing, Fiddelke said Target had lowered prices on over 10,000 items over the past year and wanted to pair those investments with differentiation in its assortment. Chief Merchandising Officer Kara Sylvester said the company had added affordable options in toys and that customers were responding to those prices.
Lee said tariff refunds contributed 3.7 percentage points to the quarterly operating margin. Excluding that benefit, he said the margin was approximately 70 basis points higher than a year earlier. He attributed higher SG&A spending partly to compensation, additional store-team hours and training, and spending on capital projects.
Fiddelke said Target had opened 24 new full-size stores so far this year and was investing in supply chain facilities and technology. Asked how far Target was through its changes, he declined to frame progress as a percentage, saying the work would continue for years. He also said home was a multi-year journey.
In the Q&A, Lee said Target expected more tariff refunds and preferred to focus on adjusted EPS excluding refunds because of their timing through the income statement.
Guidance
Target raised its full-year net sales growth outlook to a range around 5%, which CFO Jim Lee said was one percentage point above the prior outlook. The company also raised its full-year GAAP and adjusted EPS guidance to $9.90 to $10.90. Lee said the range includes $1.65 per share from second-quarter tariff refunds but excludes any potential additional refunds through the rest of the year.