Could you provide color on cost headwinds in the first half versus the second half, and discuss freight expectations for the year?

Jim Lee explained that first-half costs include accelerated depreciation from new stores/remodels and slightly elevated shrink accruals, which are primarily timing related. Freight is being monitored closely, and the guidance reflects various scenarios. “One of those examples was as we're opening new stores and remodeling, you will see much more accelerated depreciation and certain costs just hitting the first half of the year, and that's primarily timing related.”

What's the comp momentum in Q2 to date, and how will upside from comps be reinvested to maintain momentum?

Michael Fiddelke stated that reinvestment is strategic and based on conviction, not a reactive measure. Lisa Roath detailed investments including 30 new stores (on track for 300 by 2035), 100 remodels, and hundreds of millions in payroll for stores, which has led to 3-year highs in guest metrics. Michael noted Q2 faces tougher comparisons due to lapping the Nintendo Switch 2 launch. “We started the year with a clear view of where we needed to invest behind the strategy.”

What percentage of the overall merchandising overhaul is underway in Q1, what percentage will be by the end of the year, and what's planned for 2027?

Michael Fiddelke explained that the progress varies by category; some are just starting (home is a multi-year effort, with 75% of decorative accessories changing in Q2), while others like Fun101 are further along. Cara Sylvester added that a dry grocery reset (largest in a decade) is currently underway, and the Target Beauty Studio is set to launch in the fall. “I mean home is going to be multiyear work for us to get that category back to where we expect it to be over time.”

TGT

Target (TGT) Q1 FY27 earnings call: guidance and Q&A

Q: 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.”

Earnings call· Apr 2026 (Q1 FY27)· Consumer Staples· May 20, 2026

Source: earnings call transcript

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

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

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

Category	Target	Timeline	Confidence
Full-year net sales growth	centered around 4% high materiality	FY27 · 2027	Medium
Full-year adjusted EPS	near the high end of that range high materiality	FY27 · 2027	Medium
Full-year Capital Expenditures	about $5 billion high materiality	FY27 · 2027	High
Quarterly Dividend Increase	another small increase medium materiality	later this year · 2027	High
Share Repurchase Activity	some capacity to repurchase shares medium materiality	later in the year · 2027	Low

TGT operating KPIs by quarter

TGT operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Jan 2025 Q4 FY25	Jan 2026 Q4 FY26	This call Apr 2026 Q1 FY27	Jul 2026 Q2 FY27	Change vs prior quarter
Employees	400K+ And I want to thank our more than 400,000 incredible team members who bring this experience to life every day for our guests and whose focus and dedication continues to raise the bar on guest experience. Source: earnings call transcript	400K And so I feel really good about the team that we'll take the field with, both for the leadership team and across all 400,000 of our incredible team members that are going to power the growth we expect in '26. Source: earnings call transcript	400K+ With a renewed focus on what is possible and the team of more than 400,000 strong that solidly aligned behind our priorities, we're confident in our ability to deliver on our strategy and business plans, both this year and over time. Source: earnings call transcript	—	—
Stores	<2,000 I was excited to come to Target because of the amazing brand backed by assets and scale that we can apply throughout our business, including nearly 2,000 stores served by more than 60 supply chain facilities and an experienced global sourcing organization with offices around the world; a large and diversified owned brand portfolio generating more than $31 billion in annual sales; a unique and balanced mix of 6 core merchandise categories, spanning both wants and daily needs, each of which generates well over $10 billion in annual sales; a full suite of digital fulfillment capabilities that together account for more than $20 billion in annual sales with one of the fastest-growing marketplaces in Target Plus; and one of the biggest loyalty programs in the country, Target Circle, which helps to fuel Roundel, one of the largest retail advertising businesses in the US With all these assets supporting our differentiated strategy, Target has a compelling growth opportunity in the years ahead, and I'm looking forward to sharing our progress with you over time. Source: earnings call transcript	—	2,000+ And finally, we're focused on driving greater consistency across our more than 2,000 stores. Source: earnings call transcript	—	—
New stores opened	—	—	7 In Q1, we opened 7 new stores, including our 2,000th location and we remain on track to open more than 30 this year. Source: earnings call transcript	17 This quarter, we opened 17 new stores. Source: earnings call transcript	+142.9%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Product announcements

Product	Type	Timeline	Details
Baby Concierge service	launch	—
Target Beauty Studio	launch	Fall FY27

Deals & partnerships

Parke partnership

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

Roller Rabbit partnership

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

Pokemon partnership

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

K-Pop-BTS partnership

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

Capital programs

Capital Expenditures underway $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 Openings underway

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 Program underway

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 Center recently opened

Benefit:around 25 million cartons annually

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

Colorado Food Distribution Center recently opened

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

Risks & headwinds

Broader operating environment uncertainty balance 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 comparisons Q2 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 refunds rest 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 headwinds first 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 availability ongoing

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

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 read 6 chapters

Detailed narrative

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.

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.

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.

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.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.