Target doubled its adjusted earnings per share and raised full-year guidance after a second-quarter beat, but the stock fell nearly 4% anyway. CEO Michael Fiddelke pointed to more price cuts ahead, while Telsey Advisory warned the retailer's turnaround may not be linear.
Target shares fell nearly 4% to about $146.50 in early Wednesday trading, even though the retailer's adjusted earnings per share doubled to $4.11, crushing the $2.34 estimate and lifted by tariff refunds.
Earnings and guidance both beat estimates
Net sales rose 5.3% year over year to $26.5 billion, above estimates of $25.5 billion. Comparable sales gained 3.8%, topping the 2.4% forecast. Digital comparable sales climbed 8.7% over the same period.
Gross margin rose to 33.7% from 29% a year earlier, including a 370 basis point lift from tariff refunds. Target now expects full-year sales growth of 5%, with adjusted earnings per share in the $9.90-to-$10.90 range, both above analyst estimates.
CEO points to broader turnaround traction
Target has cut prices on 10,000 items, mostly food, over the past year to compete with Walmart and Kroger, and CEO Michael Fiddelke said more cuts are coming. According to Yahoo Finance, Fiddelke added: "there's a lot of work still in front of us" as the retailer works toward sustained growth.
The pillars of Target's turnaround include same-day services, private labels and last-mile logistics, and the retailer has also expanded grocery initiatives under Fiddelke.
Analysts flag risks to the rally
Analysts had already raised estimates and price targets ahead of the report. Telsey Advisory cited execution gains from Target's transformation strategy but cautioned that the turnaround may not be linear, with expectations running high.
Deutsche Bank analysts are watching whether improved execution on stores and merchandising can support durable growth, warning that much of the progress may already be priced into Target's 56% stock rally in 2026 so far.
Sources: Investor's Business Daily, Yahoo Finance
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