Key takeaways:
- Target reported a 6.7% increase in net sales for Q1 2026, reaching $25.4 billion.
- New Chief Merchandising Officer Cara Sylvester shared updates on how the company is overhauling its food offerings and COO Lisa Roath said she’s working to improvements in supply chain productivity and gross margin.
- Digital comparable sales increased 8.9%, with over 27% growth in same-day delivery via Target Circle 360.
- The company opened seven new locations in Q1, including its 2,000th store, and remains on track to open more than 30 new stores this year.
- The leadership team expects continued sales and margin growth for the remainder of 2026, but is keeping a close eye on declining customer sentiment.
Following its executive shakeup earlier this year, Target reported a notable increase in sales during its Q1 2026 earnings call, signaling early progress in the retailer’s ongoing turnaround efforts.
While CEO Michael Fiddelke, who was appointed to the role in February, noted that the company is experiencing broad-based growth across multiple categories, consistent, long-term performance remains the primary objective.
“Today we’re reporting first quarter results that are stronger than expected, early proof points that give us confidence we’re on the right path, but to be clear, a single good quarter has never been our goal,” Fiddelke said.
Chief Merchandising Officer Cara Sylvester and Chief Operating Officer Lisa Roath, who were both appointed in February, shared extensive details regarding the strategic shifts driving this momentum. From major resets in grocery aisles to an overhaul of supply chain logistics, the company is deploying a multifaceted approach to capture consumer interest and streamline store operations.
Target’s Q1 Results
Target experienced better-than-expected growth across both physical stores and digital channels to kick off the fiscal year. The company cited strength across all six core merchandising categories and improved customer traffic as primary drivers.
Key financial highlights from the first quarter include:
- Net sales reached $25.44 billion, representing a 6.7% increase compared with the $23.84 billion reported in the same period last year.
- GAAP and Adjusted earnings per share (EPS) were $1.71, compared with prior-year GAAP EPS of $2.27 and Adjusted EPS of $1.30.
- Operating income was $1.13 billion, marking a 22.9% decrease from prior-year GAAP operating income but a 29.1% increase from prior-year Adjusted operating income.
- Comparable store sales increased by 4.7%, while digital comparable sales experienced an 8.9% increase.
- Customer traffic grew by 4.4% compared with the first quarter of 2025.
- Non-merchandise sales grew by 24.6%, reflecting strong revenue growth in the Roundel advertising business, Target Circle 360 memberships and the Target+ marketplace.
Target’s Merchandising Strategy
Sylvester outlined a merchandising framework aimed at prioritizing relevance, differentiation and growth. The retailer is heavily investing in core focus areas that represent roughly half of its current sales and are projected to drive 75% of future growth.
“We have a clear strategy, we’re investing behind that strategy, and we’re seeing strong early proof points across our priority categories, but this is a multi-year journey with a ton of change still ahead of us,” Sylvester said.
Expanded Food and Wellness Drives 50% Sales Increase
A major component of this strategy is the retailer’s “food forward” initiative. Target introduced 3,000 new food items in Q1, with sales from those items growing more than 50% over the prior assortment, Sylvester said.
“We’ll continue leaning further into high growth areas like protein, functional beverages and better-for-you snacking, where guests are actively seeking newness,” she said.
The company is currently executing its largest grocery transition in more than a decade, which includes resetting nearly half of its center store assortment and removing all certified synthetic colors from its cereal products. Furthermore, health and wellness categories saw the addition of 1,500 new items.
Baby, Kids and Beauty
In the baby and kids category, Target introduced 2,000 new items starting at $1 but also including some premium items; implemented a baby concierge service pilot test in 200 stores; and recorded a more than 5% acceleration in baby comparable trends late in the quarter.
“Our laser focus on serving busy families with that combination of value, style and design is working,” Sylvester said. “It’s gaining traction, but again, we have much more work to do.”
Target also plans to launch a Target Beauty Studio concept in more than 600 stores by the fall to build on the category’s consistent growth.
Partnerships and exclusive collaborations continue to drive engagement for the brand. First-quarter drops from Parke, Roller Rabbit and Pokémon resulted in long lines outside stores and some of the strongest launch-week sales in the company’s history, Sylvester said.
New Store Openings
Target’s Q1 capital expenditures totaled $1.03 billion, representing a 31% increase from the $790 million spent the prior year. This spending was primarily driven by investments in new store locations and remodels.
The company opened seven new locations in the first quarter, including its 2,000th store, and remains on track to open more than 30 new stores this year. These new locations typically range from 125,000 to 150,000 square feet. Additionally, more than 100 remodel projects are currently underway that are designed to improve food fulfillment and frequency-driving categories.
The company also paid $516 million in dividends during the quarter, up from $510 million the previous year, driven by a 1.8% increase in the dividend per share. Target did not repurchase any stock during the first quarter, maintaining approximately $8.3 billion in remaining capacity under its current repurchase program.
First-quarter SG&A expenses reached $5.56 billion, resulting in an expense rate of 21.9%. This reflects investments in additional field team hours, higher incentive compensation and increased marketing expenses to support the retailer’s strategic rollout.
Operations Strategy Targets Inventory and Supply Chain
On the operations side, Roath emphasized strengthening execution across the enterprise and improving foundational elements like inventory availability and supply chain efficiency.
“As COO, my focus is on strengthening execution across the enterprise, giving our teams the clarity, tools and support they need to deliver our North Star, a consistent, easy, inspiring and friendly experience at every interaction, and we’re seeing encouraging momentum in Q1,” Roath said.
Improving product findability and in-stock reliability are top priorities, particularly in high-frequency categories like food and essentials. The retailer reported year-over-year improvements in top-item availability during the first quarter. Target is leveraging artificial intelligence to enhance demand forecasting, aiming to reduce volatility and keep shelves stocked during peak evening and weekend shopping hours, Roath said.
To support these store-level improvements, Target is significantly expanding its supply chain capacity. The company recently opened a new receive center in Houston expected to process 25 million cartons annually. This facility gives Target the flexibility to hold long-lead-time seasonal inventory upstream and then distribute it closer to the time of consumer demand.
Additionally, Target opened a new food distribution center in Colorado to support fresh food availability. To lead these modernization efforts, Target announced the hiring of Jeff England as the new Chief Global Supply Chain and Logistics Officer.
Target Raises 2026 Outlook Amid Declining Consumer Sentiment
Following the stronger-than-expected first quarter, Target updated its financial expectations for the remainder of 2026. The company now projects full-year net sales growth to land in a range around 4%, which is two percentage points higher than previous estimates.
Regarding profitability, Target anticipates its GAAP and Adjusted EPS will finish near the high end of the previously provided guidance range of $7.50 to $8.50. CFO Jim Lee noted that the company continues to monitor consumer sentiment and macroeconomic variables, maintaining a cautious perspective for the remainder of the fiscal year.
“We believe this year’s higher tax refunds were a source of upside to consumer spending in Q1, and that benefit will be fading over the rest of the year, while consumers have proven to be resilient so far,” Lee said. “Sentiment has been declining recently, and we’re keeping a close eye on their spending behavior.”
