Target (TGT) Q1 2026 earnings summary

Executive summary

• Net sales for Q1 2025 were $23.8 billion, down 2.8% year-over-year, with comparable sales declining 3.8% due to lower traffic and average ticket, especially in discretionary categories.

• The environment was challenging, with headwinds from declining consumer confidence, tariff uncertainty, and reactions to company updates on belonging.

• Digital comparable sales grew 4.7%, led by 36% growth in same-day delivery and strong Drive Up performance; digital sales accounted for 19.8% of total sales.

• Operating income rose 13.6% to $1.5 billion, aided by a $593 million pre-tax gain from credit card interchange fee litigation settlements.

• The company established an Enterprise Acceleration Office to drive agility, innovation, and growth.

Financial highlights

• GAAP EPS was $2.27 (up 11.7% year-over-year), including a $0.97 benefit from litigation; Adjusted EPS was $1.30, down 35.9% from last year.

• Gross margin rate was 28.2%, down from 28.8% last year, impacted by higher markdowns and digital fulfillment costs.

• SG&A expense rate was 19.3% (21.7% excluding litigation gains), compared to 21.0% last year, reflecting sales deleverage and team investments.

• Operating margin was 6.2% (3.7% excluding litigation gains), up from 5.3% last year.

• CapEx for Q1 was $790 million; full-year CapEx expected near the lower end of $4B-$5B.

Outlook and guidance

• Fiscal 2025 sales are expected to decline low-single digits; GAAP EPS guidance is $8.00–$10.00, Adjusted EPS $7.00–$9.00, reflecting tariff impacts and economic uncertainty.

• Expect continued top-line pressure in the near term, with improvement in inventory and receipt adjustment costs expected in the back half.

• Most incremental tariff exposure is expected to be offset through sourcing, assortment, and vendor negotiations, with price increases as a last resort.

• Focus remains on maintaining core business health and accelerating long-term profitable growth strategy.