Did The Market Read Target Stock Right?
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Investors who purchased Target (TGT) shares on October 20, 2025 saw a 75.1% return a year later, compared with a 15.8% gain for the S&P 500. Over that year, the retailer’s sales went from shrinking to growing. On August 19, 2026, management raised its sales outlook following a quarter helped by a tariff refund. So are more shoppers really walking into Target, and is its profit higher without that refund?
More Shoppers Are Behind Target’s Return To Sales Growth
So far, yes: Target is growing because more people shop there, not because they pay more. Revenue fell 1.6% from a year earlier in the quarter ended November 1, 2025. By the quarter ended May 2, 2026, revenue was growing at 6.7%, and the quarter ended August 1, 2026, delivered 5.3% growth.
Management said comparable sales rose 3.8% in that latest quarter, driven by a 3.6% increase in traffic, with the average ticket about flat. On the August 19 call, management raised its full-year sales growth guidance to around 5%, one percentage point above its prior outlook. Over the exact dates of Target’s rise, Walmart and Costco Wholesale returned 11.0% and 6.9%, so Target’s shares did not simply move with its rivals.
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How Much Of Target’s Profit Jump Was A Refund?
Most of it: management said tariff refunds supplied 3.7 of the 4.7 percentage points Target added to its gross margin in the quarter ended August 1, 2026. Those refunds provided a $994 million pretax benefit, recorded as a reduction of cost of sales. Target’s operating margin for that quarter was 9.6%, compared with 5.2% a year earlier.
Target’s profit is still higher without the refund, but by a much smaller amount. Excluding the refund leaves operating income at about $1.57 billion for that quarter, compared with $1.32 billion a year earlier. Management expects its full-year operating margin, excluding tariff refunds, to land around 0.5 percentage point above last year’s adjusted rate.
Target’s Yearly Sales Are Where They Were In 2022
The turnaround in the recent quarters has done little so far to change the size of the business. Target generated $108 billion in revenue over the four quarters ended August 1, 2026, up 2.0% from a year earlier and the same as over the four quarters ended July 30, 2022.
Two large categories shrank last year and barely grew in the latest quarter. Sales of home furnishings and décor fell 6.5% in the fiscal year ended January 31, 2026, and apparel and accessories sales fell 4.7% that year. On the August call, management said performance in home and apparel is not where it needs to be, and that the work will continue into 2027 and beyond. The growth the shares rose with has appeared in Target’s last two quarters, and has only begun to show up in its yearly sales.
The market read Target right on two counts: more shoppers are coming to Target, and its profit is higher without the refund, by about $250 million, a much smaller gain than the headline figure. The size of the business has barely moved since 2022. Target’s twelve-month revenue is the number to watch in its next report, expected on or around November 18, 2026.
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