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    TGT
    Earnings call· Apr 2026(Q1 FY27)

    TARGET Q1 FY27 earnings call TGT

    May 20, 2026 Source

    Executive summary

    Target Q1 FY27 — Strong Q1 Performance Driven by Traffic and Strategic Investments

    Target delivered stronger-than-expected Q1 FY27 results, with broad-based sales growth driven by increased traffic and strong digital performance. The company is encouraged by early guest response to strategic investments in merchandising and guest experience, but acknowledges this is a multi-year journey with significant work ahead. Management maintains a cautious outlook for the remainder of the year due to a challenging operating environment and tougher comparisons, while continuing to prioritize long-term sustainable growth through disciplined investments.

    Highlights

    6

    • Net sales grew by 6.7%, reflecting a 5.6% increase in comparable sales.

    • Traffic increased by 4.4%, driving comp growth.

    • Digital first-party sales grew nearly 9%, with same-day delivery up over 27%.

    • Target Plus GMV grew nearly 60%.

    • Adjusted EPS of $1.71, up 32% year-over-year.

    • Gross margin rate improved by 80 basis points to 29%.

    Concerns

    4

    • SG&A expense rate of 21.9% was 20 basis points higher than last year's adjusted rate of 21.7%.

    • Sales in home and apparel were still below 2024 levels, indicating areas for improvement.

    • Product findability and in-stock availability remain friction points for guests.

    • Facing harder prior year comparisons in Q2, including lapping the Nintendo Switch 2 launch.

    Guidance & targets

    5
    CategoryTargetConfidence
    Full-year net sales growth
    centered around 4%
    high materiality
    Medium
    Full-year adjusted EPS
    near the high end of that range
    high materiality
    Medium
    Full-year Capital Expenditures
    about $5 billion
    high materiality
    High
    Quarterly Dividend Increase
    another small increase
    medium materiality
    High
    Share Repurchase Activity
    some capacity to repurchase shares
    medium materiality
    Low

    Operational metrics

    25
    Net sales
    $25.4 billion6.7% higher than last year and 3.7% higher than 2 years ago
    Q1 FY27

    Net sales were stronger than expected, exceeding expectations.

    Comp growth
    5.6%
    Q1 FY27

    Comp growth was driven primarily by traffic, which more than offset a 2.4% decline a year ago.

    Digital first-party sales growth
    nearly 9%
    Q1 FY27

    Led by growth in same-day delivery.

    Same-day delivery growth
    more than 27%
    Q1 FY27

    Contributed to digital first-party sales growth.

    Target Plus GMV growth
    nearly 60%
    Q1 FY27

    Growth on our third-party digital sales platform.

    Gross margin rate
    29%80 basis points higher than a year ago
    Q1 FY27

    Improvement was the result of various factors.

    Adjusted SG&A rate
    21.9%20 basis points higher than last year's adjusted rate of 21.7%
    Q1 FY27

    This year's adjusted SG&A expense growth of around 7% reflected planned investments.

    Operating margin rate
    4.5%lower than last year's rate of 6.2% and about 80 basis points higher than last year's adjusted rate of 3.7%
    Q1 FY27

    Overall operating margin performance for the quarter.

    EPS
    $1.7124% lower than prior year GAAP EPS and 32% higher than prior year adjusted EPS
    Q1 FY27

    Business delivered first quarter GAAP and adjusted EPS.

    Dividends paid
    $516 millionup slightly from a year ago
    Q1 FY27

    Driven by an increase in the per share dividend, partially offset by a lower share count.

    Inventory turns
    up more than 10%year-over-year
    Q1 FY27

    Saw higher inventory productivity in Q1.

    Houston receive center processing capacity
    around 25 million cartons
    annually

    The new facility significantly expands upstream network capacity.

    Baby comp trends acceleration
    more than 5 percentage point
    back half of Q1 FY27

    Following the launch of new offerings in the baby category.

    Wellness-related categories sales growth
    double-digitdoubling comp growth rates compared with Q4 of last year
    Q1 FY27

    Driven by 1,500 new items and 40% assortment refresh.

    New food items sales growth
    more than 50%over the prior assortment
    Q1 FY27

    Sales from 3,000 new food items introduced in Q1.

    Toys comp growth
    double-digitagain this quarter
    Q1 FY27

    Supported by on-trend toy assortments at affordable prices.

    Decorative accessories assortment change
    nearly 3/4
    Q2 FY27

    Significant edits to decorative accessories as part of multiyear home reinvention.

    Center store grocery assortment reset
    nearly half
    Q2 FY27

    Largest transition in over a decade for dry grocery area.

    New food items pace acceleration
    nearly 50%
    Q2 FY27

    Accelerating pace of newness in food.

    Beauty Studio launch stores
    more than 600
    Fall FY27

    Preparing for the launch of the Target Beauty Studio concept.

    Guest experience training participants
    more than 300,000
    ongoing

    Training reinforces strategy and builds accountability across the field.

    Store remodels underway
    over 100
    FY27

    Scaling the remodel program with enhanced focus on food and frequency driving categories.

    New stores opened
    7
    Q1 FY27

    Includes the 2,000th location.

    New stores planned
    more than 30
    FY27

    Remaining on track for the full year.

    New stores planned by 2035
    300
    by 2035

    Long-term goal for store expansion.

    Industry KPIs

    7
    MetricValueDetails
    Sg a rate21.9%%
    Marketplace 3p GMVnearly 60%%
    Gross margin drivers29%%
    Warehouse store club count7stores
    Comparable same store sales5.6%%
    E commerce digital sales growthnearly 9%%
    Category level comps and inflation deflationmid-single-digit compound growth%

    Product announcements

    2
    ProductTypeDetails
    Baby Concierge servicelaunch
    Target Beauty Studiolaunch

    Deals & partnerships

    4
    Parkepartnership

    Q1 collaboration drop, creating buzzworthy assortments and experiences exclusive to Target.

    Roller Rabbitpartnership

    Q1 collaboration drop, creating buzzworthy assortments and experiences exclusive to Target.

    Pokemonpartnership

    Only at Target cross-category collaboration, positioning Target at the center of a powerful global franchise.

    K-Pop-BTSpartnership

    One of four socially driven launches in Q1 that created buzz and traffic.

    Capital programs

    5
    Capital Expendituresunderway$5 billion
    Period spend: $1 billion
    Spent to date: $1 billion

    Deployed $1 billion in Q1 and continue to expect $5 billion for the full year, investing behind growth priorities outlined at the financial meeting.

    New Store Openingsunderway
    Spent to date: 7 stores opened in Q1 FY27

    Benefit: 2,000th location opened in Q1 FY27

    Opened 7 new stores in Q1, including the 2,000th location, and remain on track to open more than 30 this year, working towards 300 by 2035.

    Store Remodel Programunderway
    Spent to date: over 100 projects already underway

    Benefit: enhanced focus on food and frequency driving categories

    Scaling the remodel program with over 100 projects underway, prioritizing projects with strong returns and impact on guest experience.

    Houston Receive Centerrecently opened

    Benefit: around 25 million cartons annually

    A recently opened facility adding network capacity, significantly expanding upstream network capacity.

    Colorado Food Distribution Centerrecently opened

    A recently opened facility adding network capacity, specifically for food distribution.

    Risks & headwinds

    5
    Broader operating environment uncertaintybalance of the year

    consumers weighing multiple headwinds and tailwinds and recent dips in consumer sentiment

    Mitigation: maintaining a cautious outlook overall, placing a premium on flexibility

    Tougher prior year comparisonsQ2 FY27

    hardest comparison in Q2, a nearly 2 percentage point difference as we begin lapping last year's launch of the Nintendo Switch 2

    Mitigation: maintaining a cautious outlook overall

    Benefit from higher tax refundsrest of the year

    this year's higher tax refunds were a source of upside to consumer spending in Q1 and that benefit will be feeding over the rest of the year

    Mitigation: maintaining a cautious outlook overall

    Challenging cost headwindsfirst half of the year

    more challenging cost headwinds in the first half of the year

    Mitigation: expected to moderate in the second half

    Product findability and in-stock availabilityongoing

    remain the biggest friction points for our guests, particularly in high-frequency categories like food and at critical times like evenings and weekends

    Mitigation: focused on improving in-stocks, investing to improve data and network visibility

    Q&A highlights

    6

    What key changes have been made that have sustainability, especially with organizational changes and SG&A control, for profitable growth?

    Michael Fiddelke emphasized growth driven by leading with style, design, and value, elevating merchandising and guest experience. Cara Sylvester highlighted laser-focused merchandising on busy families, newness in wellness (3,000 new food items, 1,500 new wellness items), and a baby category overhaul (2,000 new items, baby concierge test in 200 stores).

    “It's all about growth. The strategy we've laid out with a clear focus on us winning in our unique lane.”

    asked by Corey Tarlowe · answered by Michael Fiddelke

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Focus and Early Proof Points

    Michael Fiddelke highlighted the refreshed strategy focusing on merchandising authority, guest experience, technology, and team. Q1 results showed early success with broad-based growth across channels and categories, driven by traffic. Categories like Fun101, beauty, and food and beverage saw mid-single-digit 2-year compound growth, while home and apparel remained below 2024 levels, indicating areas for continued focus. The company is encouraged by early guest response to these strategic shifts.

    02

    Merchandising Evolution and Prioritized Assortments

    Cara Sylvester detailed the evolution of merchandising plans to enhance relevance and differentiation, with a laser focus on serving busy families. Prioritized assortments, representing half of current sales and expected to drive three-quarters of future growth, include baby and kids, health and wellness, food, women's style, home, and culture-driven categories. Examples like the baby concierge test in select stores, 1,500 new wellness items, and 3,000 new food items showed strong guest response and double-digit sales growth in respective categories.

    03

    Operational Excellence and Guest Experience

    Lisa Roath emphasized strengthening execution across stores and supply chain facilities. Q1 store experience metrics reached 3-year highs, with improved Net Promoter Scores and overall satisfaction regarding wait times, product availability, store cleanliness, and team interactions. Key focus areas include improving in-stock availability, optimizing store workload through payroll and training investments, and enhancing technological tools like myDevice. Product findability and in-stock availability remain the biggest friction points for guests.

    04

    Supply Chain and Infrastructure Investments

    The company is investing in its supply chain to improve reliability, speed, and cost efficiency. Q1 saw higher inventory productivity, with turns up more than 10% year-over-year, and consistent top item availability. New facilities, including a receive center in Houston (expected to process 25 million cartons annually) and a food distribution center in Colorado, are expanding network capacity. Jeff England was hired as Chief Global Supply Chain and Logistics Officer to drive further improvements.

    05

    Capital Deployment and Store Expansion

    Target deployed $1 billion in capital expenditures in Q1 and plans $5 billion for the full year. Seven new stores were opened in Q1, including the 2,000th location, with more than 30 planned for the year and a long-term goal of 300 by 2035. Over 100 remodels are underway, with an enhanced focus on food and frequency-driving categories, leveraging the stores-as-hub fulfillment model to support both in-store and digital sales.

    06

    Q2 Outlook and Cautious Approach

    Management is maintaining a cautious outlook for the rest of the year, citing the easiest prior-year comparison in Q1 and the hardest in Q2, which includes lapping the Nintendo Switch 2 launch from last year. Higher tax refunds in Q1 are also noted as a potential one-time📎 benefit to consumer spending. Cost headwinds are expected to be more challenging in the first half of the year but are anticipated to moderate in the second half.

    AI-generated summary of the company’s earnings call. Not investment advice.