What Could Surprise Target Stock Investors On The Upside?
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Target (TGT) stock returned 82.6% over the past twelve months, against 9.9% for the S&P 500. Buyers may be betting that the company’s turnaround is working, and the latest quarter gave them some support. Sales in the three months to August 1, 2026, grew 5.3% from a year earlier. Yet two large merchandise areas that management calls high-margin barely grew in that quarter. Which two areas are they, and does Target have the shoppers to sell them more?
Target Draws More Shoppers, But Home And Apparel Lag
The two categories are home and apparel, and Target already has the shoppers to sell them to. Traffic rose 3.6% from a year earlier in the quarter to August 1, 2026, while comparable sales rose 3.8%. Management said on the August 19, 2026, call that the growth held across months and across income brackets.
Target’s shoppers are buying more in food, where the company has reworked its shelves. After the company’s largest food transition in more than a decade, management said snack sales were running more than 15% ahead of last year. Home and apparel are the exception. Management called their growth flattish and said it is not satisfied with either business. Target has the visits, but the company has not yet turned them into growth in home and apparel.
How Big Are Home And Apparel At Target?
Home and apparel together made up about 30% of Target’s revenue in the fiscal year that ended January 31, 2026. Both categories shrank that year: home furnishings and décor sales fell 6.5%, and apparel and accessories sales fell 4.7%. That share is large enough for a return to growth to show in the company’s total, and management said it looks forward to the earnings power potential of those two categories growing steadily again.
On November 5, 2026, Target stock closed 7.0% below its highest close of the past year. The turnaround is still under way. Home and apparel represent the part of that turnaround that has not yet shown up in sales.
How Long Could Target’s Home And Apparel Work Take?
When the call turned to why those two areas had not gained more from the stronger traffic, management said it expects the work in home and apparel to continue into 2027 and beyond. Some of that work is under way. Target had just reset 75% of its decorative accessories assortment in home, with significant assortment changes ahead in kids-home and bedding.
The quarter’s profit figures also need a caveat, because most of the profit jump came from tariff refunds. Target’s operating margin rose to 9.6% in the quarter, up from 5.2% a year earlier. Tariff refunds accounted for 3.7 points of the latest quarter’s rate. Without them, management said the margin was about 70 basis points higher than a year earlier. So the underlying gain in profit is much smaller than the headline jump. If home and apparel stay flat, Target’s growth has to come from the rest of the store.
So far, shoppers are coming to Target, but they are not yet buying more in home and apparel. Sales growth in home and apparel is the number to watch when Target next reports, expected in November 2026.
A turnaround running into 2027 may meet rough markets along the way. Be ready with a plan for a crash and a rally.
Now You Know Target. Here Is A Better Way To Invest
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