10-QPeriod: Q1 FY2027

TARGET CORP Quarterly Report for Q1 Ended May 2, 2026

Filed May 29, 2026For Securities:TGT

Summary

Target Corporation's first quarter 2026 filing for the period ending May 2, 2026, reveals a mixed financial performance. Net sales increased by 6.7% year-over-year to $25.4 billion, driven by a 5.6% comparable sales increase and growth in non-merchandise sales, notably in their digital advertising business. However, GAAP operating income saw a significant decrease of 22.9% to $1.1 billion, primarily due to the absence of a large one-time gain from interchange fee settlements recorded in the prior year's comparable period. Excluding this, adjusted operating income showed a healthy increase of 29.1% year-over-year. Despite the reported operating income decline, the company's focus on operational efficiency is evident. The gross margin rate improved to 29.0% from 28.2%, benefiting from lower markdowns and increased advertising revenue, while supply chain productivity also contributed positively. However, the SG&A expense rate increased, partly due to the prior-year settlement benefit but also driven by higher compensation costs and new store expenses. Investors should note the decrease in diluted EPS to $1.71 from $2.27, largely attributable to the prior-year settlement gain. The company continues its disciplined capital allocation, with a maintained dividend payout, and no share repurchases in the current quarter.

Financial Highlights

47 data points
Beta

Revenue

$25.44B

29.0% Gross Margin

Net Income

$781.00M

3.1% Net Margin

EPS (Diluted)

$1.71

Total Assets

$58.01B

Cash & Equivalents

$3.53B

Free Cash Flow

-$319.00M

Financial Statements
Beta
Revenue$25.44B
Cost of Revenue$18.06B
Gross Profit$7.38B
SG&A Expenses$5.56B
Operating Income$1.14B
Net Income$781.00M
EPS (Basic)$1.72
EPS (Diluted)$1.71
Shares Outstanding (Basic)453.80M
Shares Outstanding (Diluted)455.80M

Key Highlights

  • 1Net sales increased 6.7% to $25.4 billion, driven by comparable sales growth of 5.6% and strong performance in non-merchandise categories, particularly digital advertising.
  • 2GAAP operating income decreased 22.9% to $1.1 billion, largely due to the lapping of a significant $593 million gain from interchange fee settlements in the prior year.
  • 3Adjusted operating income, excluding the prior-year settlement gain, increased by a robust 29.1% to $1.1 billion, indicating underlying operational improvement.
  • 4Gross margin rate improved to 29.0% from 28.2% year-over-year, driven by merchandising efficiencies and higher advertising revenue.
  • 5Diluted EPS decreased to $1.71 from $2.27, a result primarily influenced by the absence of the prior-year settlement gain.
  • 6The company maintained its dividend, paying $1.14 per share, but did not engage in share repurchases during the quarter.
  • 7Inventory levels decreased year-over-year, indicating improved inventory management or higher than expected sales.

Frequently Asked Questions

The primary reason for the reported decrease in GAAP operating income and diluted earnings per share is the absence of a significant one-time gain of $593 million from interchange fee settlements that was recorded in the comparable prior-year period. When excluding this item, the company's adjusted operating income shows substantial year-over-year growth.

Target reported a net sales increase of 6.7% to $25.4 billion. This growth was driven by a 5.6% increase in comparable sales, which includes a 4.4% rise in traffic and a 1.1% increase in average transaction amount. Additionally, non-merchandise sales, particularly from the digital advertising business, contributed significantly to the top-line growth.

Target is focused on disciplined capital allocation, prioritizing profitable growth, maintaining and growing its dividend, and then returning excess cash via share repurchases. For inventory, the company saw a year-over-year decrease, which may reflect improved sales performance and better inventory management. The company did not repurchase any shares in the current quarter.

The SG&A expense rate increased due to the prior-year period benefiting from the interchange fee settlement. Excluding this, the adjusted SG&A expense rate also saw a slight increase, attributed to higher compensation expenses (including store payroll and incentive compensation), costs associated with new stores and remodels, and other net cost increases, which more than offset the leverage from higher sales.