Target's customers came back — 3.6 of its 3.8 points of comparable-sales growth were traffic — and its profit doubled on a tariff refund

Every figure in this article is drawn from Target's second-quarter 2026 results, published 19 August 2026, and its SEC filings, or from CNBC and Axios as attributed. Target's fiscal year ends in late January or early February. Sections marked as analysis are identified as such.

Target's problem for three years has not been that its customers spent less. It is that fewer of them came. Annual sales fell in each of the last three fiscal years, the fourth quarter of the last one closed with comparable sales down 2.5 per cent, and a management team that had run out of explanations was replaced.

This morning the number turned, and it turned in the right place. Comparable sales rose 3.8 per cent, of which 3.6 points were traffic and 0.2 points were ticket. Almost none of it was price.

The quarter

Net sales reached $26.5 billion, up 5.3 per cent, taking the half-year to $52.0 billion. Store comparable sales grew 2.7 per cent and digital comparable sales 8.7 per cent, with same-day delivery up more than 25 per cent. All six core merchandise categories grew, with hardlines in double digits and food, beverage and beauty in the high single digits.

Operating income was $2.6 billion, up 94.4 per cent, at a 9.6 per cent margin. Earnings of $4.11 a share doubled. Target raised full-year sales-growth guidance by a percentage point to about 5 per cent and now expects earnings of $9.90 to $10.90.

The part of the profit that is not the turnaround

The gross margin rate of 33.7 per cent includes 3.7 percentage points from tariff refunds — Target's share of the duties repaid after the emergency-powers tariffs were struck down. Full-year earnings guidance includes $1.65 a share from the same source.

Strip it out and the picture is still good but a great deal less dramatic: gross margin expanded roughly 100 basis points on its own merits. That is a solid, unspectacular retail recovery — the kind produced by better inventory discipline, fewer markdowns and more full-price selling — rather than the near-doubling of profit the headline implies.

Target has been transparent about the split, which is to its credit and is worth noting. Several large American retailers received the same windfall this year. Not all of them separated it out this clearly.

It is also worth noting how large a swing factor trade policy has become in ordinary retail accounting. A general merchandiser importing a substantial share of what it sells now has an earnings line that moves on court rulings, and this year it moved in Target's favour by more than a dollar and a half a share. The same mechanism will move against somebody next year.

What actually changed

Michael Fiddelke took over as chief executive in February after two decades inside the company, most recently as chief operating officer, and did not announce a reinvention. He announced a clarification: fix the stores, fix the assortment, fix availability, and stop asking the brand to carry arguments it was never designed to carry.

Behind that sits roughly $5 billion of investment aimed at store conditions and merchandising — unglamorous work of the sort that shows up in traffic numbers a year later. His comment on this quarter was correspondingly modest: "Second quarter results build on encouraging momentum we saw in the first quarter, giving us increasing confidence."

The digital line suggests where the recovery is coming from. Same-day delivery growing above 25 per cent, and digital comps at more than three times the store rate, describe a customer who has decided Target is convenient again. For a retailer whose problem was footfall, the fastest route back was never a new advertising campaign; it was making the thing available when the customer wanted it.

The store number tells the other half of the story. Physical comparable sales grew 2.7 per cent — respectable, and well below digital. Target operates roughly two thousand large stores whose economics depend on volume through the door, and while a 2.7 per cent gain stabilises them it does not yet fix the underlying question of what those buildings are for in a business whose growth is arriving online.

Analysis: the boycott year

Any account of Target's decline that omits 2025 is incomplete. The company's retreat from its diversity commitments triggered an organised consumer boycott that ran for the better part of a year, and Fiddelke has acknowledged directly that boycotts were "one of the things that impacted our sales." The principal campaign was called off in March. A separate boycott began in the spring over the company's response to immigration enforcement activity in Minneapolis.

The commercially interesting fact is how visible the effect was in the numbers, in both directions. Target is unusually exposed to this because its brand was built on affinity rather than price — people shopped there because they liked it, which means that when they stop liking it there is no cheaper alternative keeping them in the car park. Walmart does not have this problem; it has a different one.

The asymmetry is worth spelling out. A retailer competing on price is judged on price, and a customer who disagrees with its politics still saves money by shopping there. A retailer competing on affinity is judged on affinity, and there is no compensating reason to stay. Target spent twenty years cultivating the second kind of relationship, which worked extremely well until the moment it was tested.

That is the fragility underneath this morning's recovery. Traffic returned once the campaign ended and the stores improved. It could leave again on the same terms.

Analysis: what to watch next

Two things will determine whether this is a turn or a bounce. The first is whether traffic growth survives the comparison — Target is now lapping quarters that were themselves weak, and a 3.6 per cent traffic gain against a depressed base is a different achievement from one against a normal year.

The two-year compounded growth rate Target disclosed alongside the quarter — about 2.1 per cent — is the honest way to read through that distortion, and it is a much more sober figure than 5.3 per cent. It describes a company that has stopped shrinking rather than one that has started growing quickly, which is the correct stage of a recovery to be at eighteen months in.

The second is what happens to reported earnings when the tariff refunds stop. Guidance embeds $1.65 a share of them this year, which will not repeat; a company whose underlying margin expanded about 100 basis points will look considerably less impressive in a year when that is all it has.

None of which diminishes the substance of the quarter. For three years Target's problem was that people had stopped coming through the door, and this morning it reported that 3.6 per cent more of them did. Everything else in the release is arithmetic. That number is the business.

For the wider retail picture, Target and Costco reporting rising traffic in the same season that fast-food chains reported falling guest counts is the most useful signal of the year. It suggests the American consumer has not withdrawn so much as reallocated — fewer small impulse visits, more planned ones — and that the retailers built for the second kind are the ones currently gaining.