Retail giant Target was bolstered by a nearly $1 billion tariff refund in the second quarter, and its 5.3% net sales growth for the period enabled the company to significantly increase its full-year outlook, causing its stock to spike Aug. 19.
Net sales for the Minneapolis-based retailer reached $26.5 billion for the three-month period ended Aug. 1, according to the retailer.
“Second quarter operating income, which included a $994 million benefit from tariff refunds, was $2.6 billion, compared with prior-year operating income of $1.3 billion,” the company reported yesterday.
The refund was the result of the US Supreme Court decision in February that struck down the tariffs imposed by the Trump administration under the International Emergency Economic Powers Act.
The company’s operating income margin rate – a financial metric that shows the percentage of revenue left over after paying the costs of running the business – reached 9.6% for the quarter, 3.7 percentage points of which came from tariff refunds. That means Target retained 9.6 cents in operating profit for every $1 of sales for the quarter.
Comparatively, the operating income margin rate was 5.2% during the same period a year ago, according to Target.
Target outlook brightens
Q2 was the second consecutive quarter of positive sales growth for Target, following five consecutive quarters of sales declines for the company.
The boost enabled Target to raise its full-year outlook to a range of $9.90 to $10.90 per share on revenue of $110.02 billion, up from $7.50 to $8.50 per share on revenue of $108.97 billion.
“Second quarter results build on the encouraging momentum we saw in the first quarter, giving us increasing confidence that our strategy is resonating with our guests and strengthening our leadership position in style, design and value,” said Target CEO Michael Fiddelke.
He noted that Target has cut prices on more than 10,000 frequently purchased products over the past year as part of the company’s “commitment to delivering outstanding value every day, while continuing to invest in newness, convenience and an elevated shopping experience.”
Stock boost for Target
The financial outlook adjustment beat the analyst consensus earnings estimate that the company would finish out the year with $8.43 per share on revenue of $108.69 billion, according to Earnings Whispers.
Target also beat the quarterly consensus earnings estimate, returning $2.46 per share on revenue of $26.54 billion. Wall Street analysts pegged the quarterly earnings estimate at $2.30 per share on revenue of $26 billion.
The company’s outperformance sent its stock price soaring for the day, jumping 6.23% to reach an intraday high of $161.98 per share, before dropping back to $159 for the day.
Target’s food strategy
The successful quarter was driven by Target’s refreshed strategy of returning to sustainable growth, which Fiddelke said is centered on busy families.
Target’s four key priorities include “leading with merchandising authority, elevating the guest experience, accelerating technology and strengthening our team and communities,” Fiddelke said.
“While there’s still meaningful work ahead, we’re encouraged by the progress we’re making and remain focused on executing with discipline, staying agile in a dynamic operating environment and investing in our team and capabilities to drive sustainable, profitable growth over the long-term,” Fiddelke said.
Target Chief Merchandising Officer Cara Sylvester noted that near the beginning of 2026, the company said it aims to make Target a destination for food products, “not simply a category a guest shops while they’re in our stores, but a reason they come to Target.”
She explained that Target has been hard at work this year completing its largest food transition in more than a decade, which includes reorganizing much of the center store grocery assortment.
Target also added new products and reimagined end-caps and in-aisle presentation, she said.
“This wasn’t just about resetting aisles. We also expanded fresh produce, created new focals for seasonal offerings, added space for fast-growing categories like snacks, global foods and functional coffee, and continued introducing emerging brands and trending products,” she said.
Customers are responding positively to the changes, she said.
“Snacks, beverages and candy were already among our largest categories by sales, and these transitions are building on that strength,” she said.
Post-transition snack sales running “more than 15% ahead of last year,” she said, explain that protein bars, meat stick and better-for-you snacking are showing “outstanding momentum.”
