Target posted a better-than-expected first quarter of 2026, with net sales up 6,7% to $25,4 billion and signs of widespread strengthening across product categories, sales channels, and the digital space. This allows the American group to present itself to the market with a message of confidence, despite an operating environment that management continues to characterize as uncertain.
Specifically, comparable traffic increased 4,4% compared to the first quarter of 2025, comparable sales grew 5,6%, and digital grew 8,9%, driven in particular by a jump of more than 27% in same-day deliveries enabled by Target Circle 360, confirming the growing importance of express services in the group's strategy.
Growth wasn't limited to merchandise, as non-merchandise revenue increased nearly 25%, driven primarily by Roundel advertising, Target Circle 360 memberships and the Target+ marketplace, while across core categories, all six major product areas saw year-over-year sales increase.
GAAP and adjusted earnings per share were $1,71, 24% lower than first-quarter 2025 GAAP EPS, which incorporated one-time benefits related to an interchange fee lawsuit, but 32% higher than adjusted EPS for the same period last year, indicating that the pure operating comparison remains favorable.
Operating profit was $1,1 billion, down 22,9% year-over-year on a GAAP basis but up 29,1% on an adjusted basis, while operating margin fell to 4,5% from 6,2% a year ago on a GAAP basis, but remained above the adjusted 3,7% for 2025, reflecting a more complex but not negative picture in terms of underlying profitability.
Improved logistics productivity, growth in advertising and other non-merchandise revenue, and a decline in aggressive discounting helped support the gross margin, which rose to 29,0% from 28,2%, although these factors were partially offset by higher product costs. Meanwhile, the SG&A ratio increased to 21,9% due to higher personnel costs, additional hours and training for store teams, higher incentives, capital expenditures, and increased marketing investments.
Financially, Target closed the quarter with cash and equivalents of $3,5 billion, capital expenditures of $1,0 billion, up 31% from a year ago and primarily focused on new stores and renovations, dividends of $516 million, and no buybacks in the period, while the residual capacity of the authorized repurchase plan remains approximately $8,3 billion.
For the full year 2026, the group has raised its expectations and now expects sales growth of around 4% compared to 2025, two points above the previous guidance, an annual operating margin more than 20 basis points higher than the adjusted 4,6% in 2025 and GAAP and adjusted EPS at the high end of the previous range of $7,50 to $8,50.
In the words of CEO Michael Fiddelke, the quarter offers "encouraging initial signs" that the revised strategy is resonating with customers and supporting broader business growth, even as the group reiterates the need to remain disciplined and flexible in a still challenging market environment and to continue investing in its teams, operational capabilities, and shopping experience to unlock its full potential in the medium term.
