Target Corp

Equity Research 19 August 2026 | 7:58AM EDT

Target Corp. (TGT): First Take: 2Q earnings beat; FY26 guidance raised

Target reported 2Q26 adj. EPS of $4.11, above GS/consensus (FactSet) at Kate McShane, CFA | $2.11/$2.34. Excluding tariff refunds, the company’s 2Q26 EPS was $2.46. SSS came Goldman Sachs & Co. LLC in at +3.8%, vs. consensus of +2.4%, with an increase in ticket (+0.2%) and traffic Emily Ghosh (+3.6%). By channel, the store comp increased 2.7% while the digital comp increased | 8.7% (over 25% growth in same day delivery). Target delivered net sales growth y/y Goldman Sachs & Co. LLC

in its six core merchandising categories. Mark Jordan, CFA | Guidance: Target updated its FY26 guidance, increasing net sales growth to a range Goldman Sachs & Co. LLC around +5%, from a range around +4% prior (vs. GS/consensus of +4.0%/+4.1%). Nishi Agarwal | The company is guiding to a FY26 operating income margin in a range around 6%, Goldman Sachs India SPL including ~90 bps of benefit from 2Q tariff refunds. Excluding tariff refunds, Target raised its operating income margin guidance to a range around 50 bps higher y/y, Grace Chee | from more than 20 bps higher y/y prior (from 4.6% in FY25). The company is guiding Goldman Sachs & Co. LLC

to EPS of $9.90-10.90, including 2Q tariff refund benefits of $1.65. Excluding tariff Samantha Chiang | refunds, Target increased its EPS expectations by $0.75 at the midpoint, versus prior Goldman Sachs & Co. LLC guidance to near the high end of $7.50-8.50 (vs. GS/consensus at $8.31/$8.52). Company guidance excludes any potential future tariff refunds.

Analysis n Gross margin came in at 33.7%, including a 3.7 ppt benefit from tariff refunds. Excluding tariff refunds, gross margin of ~30% was higher than GS/consensus at 29.6%/29.7%. The y/y increase of ~100 bps reflects the comparison over last year’s elevated markdowns and purchase order cancellation costs, as well as continued growth in advertising and non-merchandise sales. n SG&A expenses increased 6.8% y/y. The expense ratio came in at 21.6% (+32 bps y/y) vs. GS/consensus at 21.9%/21.6%, driven by higher compensation costs (incl. additional hours for field teams and higher incentive compensation) and planned spending related to capital projects, partially offset by the leverage benefit of strong top line growth. n EBIT came in at $2.6bn, including a $994mn benefit from tariff refunds. Excluding this benefit, EBIT tracked higher than GS/consensus of $1,322mn/$1,490mn. EBIT margin was 9.6%, including a 3.7 ppt benefit from tariff refunds, vs. GS/consensus at 5.1%/5.7%. n Inventory increased 2.9% y/y vs. a retail sales increase of 5.0%.

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Goldman Sachs Target Corp. (TGT)

Implications The stock is currently down ~2% in the pre-market. On the call, we are interested in: the cadence of SSS throughout 2Q; QTD trends by category; the relative impact of the gross margin drivers, including markdowns, mix, and shrink; the view of inflation; details on the company’s inventory position and promotional outlook; additional color around tariff refunds and updated FY26 guidance.

Valuation & Risks We are Neutral rated on TGT. Our 12-month price target is $127 based on our risk-reward framework with bear/base/bull case relative multiples of 55%/60%/65%.

Upside risks: 1) the macro backdrop improves, leading to an increase in discretionary spending; 2) TGT sees incremental market share gains; 3) TGT could pull additional levers to decrease SG&A spend.

Downside risks: 1) traffic and sales trends decelerate due to weakness in consumer spending; 2) inflationary pressures related to product costs, freight/transportation, and/or wages; 3) the…