Target Raises Outlook After Strong Q1 Results as Sales Growth, Store Traffic, and Digital Demand Improve

Target Corporation reported a stronger-than-expected first quarter for fiscal 2026, giving investors fresh signs that the retailer’s turnaround plan is starting to gain traction. The company said net sales increased 6.7% to $25.4 billion, while comparable sales rose 5.6%, supported mainly by higher shopper traffic and better performance across stores and digital channels.

According to MarketBeat, Target’s management described the quarter as an encouraging step, but not a final victory. Chief Executive Officer Michael Fiddelke said the company is focused on building consistent long-term growth rather than celebrating one strong quarter.

Sales Growth Shows Early Turnaround Progress

Target’s first-quarter performance improved across several important areas. Store sales rose nearly 6% from the previous year, contributing around two-thirds of total net sales growth. Digital sales also improved, with first-party digital sales up nearly 9%.

Same-day delivery was one of the strongest digital drivers, growing more than 27%. Target Plus, the company’s third-party marketplace, also posted strong momentum, with gross merchandise value rising nearly 60% during the quarter.

Merchandising Strategy Gains Momentum

Target said its updated merchandising plan is starting to connect with shoppers. The company is focusing more heavily on categories such as beauty, health and wellness, food, baby and kids, women’s style, home, toys, and entertainment.

Chief Merchandising Officer Cara Sylvester said these areas already represent about half of Target’s sales and are expected to drive most future growth. In baby and kids, the company saw improved comparable-sales trends after launching new products and services, including Baby Concierge in selected stores.

Wellness was another bright spot. Target added around 1,500 new wellness-related items and plans to refresh about 40% of that assortment this year. These changes helped drive double-digit sales growth in the category during the first quarter.

Food Category Becomes a Bigger Priority

Food also played an important role in Target’s improved performance. The company introduced about 3,000 new food items during the quarter. Sales from those new items grew more than 50% compared with the previous assortment.

Target plans to reset nearly half of its center-store grocery assortment in the second quarter. Management described this as the company’s largest grocery transition in that area in more than a decade.

Exclusive Launches Help Bring Shoppers Back

Target also benefited from exclusive and limited-time product launches. Partnerships with brands such as Parachute, Roller Rabbit, Pokémon, and BTS helped increase customer interest, social media engagement, and launch-week sales.

These events are important because they give shoppers a reason to visit stores or shop online quickly. For a retailer like Target, exclusive launches can help create excitement while also supporting sales in related categories.

Operations and Store Experience Improve

Target said it is also working to improve store operations, inventory availability, training, and supply chain execution. Chief Operating Officer Lisa Roath said several guest-experience metrics reached three-year highs, including customer satisfaction with wait times, cleanliness, product availability, and team member interactions.

However, management admitted that some challenges remain. Product findability and in-stock availability are still key issues, especially in food and during busy evening and weekend shopping periods.

Target has trained more than 300,000 team members and leaders to improve the guest experience. The company is also investing in technology tools such as handheld devices and performance dashboards to make store work easier and faster.

New Stores, Remodels, and Supply Chain Investments Continue

During the quarter, Target opened seven new stores, including its 2,000th location. The company still expects to open more than 30 stores this year. It also has more than 100 remodel projects underway, with extra focus on food and other frequently purchased categories.

On the supply chain side, Target opened a receive center in Houston and a food distribution center in Colorado. The Houston facility is expected to process about 25 million cartons each year.

Margins Improve on an Adjusted Basis

Target’s gross margin rate reached 29%, about 80 basis points higher than a year earlier. Chief Financial Officer Jim Lee said the improvement came from productivity efforts, supply chain leverage, lower markdowns, and growth in higher-margin businesses such as Roundel and Target Plus.

Operating margin was 4.5%. While that was lower than the prior year on a GAAP basis, it was better than the adjusted operating margin from the previous year. Target reported GAAP and adjusted earnings per share of $1.71.

Target Raises Full-Year Guidance

After the strong first quarter, Target raised its full-year sales outlook. The company now expects full-year net sales growth centered around 4%, which is about two percentage points higher than its previous forecast.

Target also expects earnings per share to finish near the high end of its earlier guidance range of $7.50 to $8.50.

Even so, executives remained cautious. Management said the first quarter had easier year-over-year comparisons, while the second quarter will face tougher comparisons. Consumer spending may also become less predictable as the year continues.

Capital Spending Plan Remains Unchanged

Target spent about $1 billion in capital expenditures during the first quarter and still expects about $5 billion in capital spending for the full year. These investments are tied to store growth, remodels, digital improvements, and supply chain upgrades.

The company also paid $516 million in dividends during the quarter. Target did not repurchase shares, but management said buybacks could resume later in the year if business trends remain healthy.

Investor Takeaway

Target’s first-quarter results suggest that its turnaround strategy is beginning to show progress. Stronger traffic, better digital demand, improved merchandising, and continued store investments helped the company beat expectations and raise its full-year outlook.

Still, management made it clear that the recovery is not complete. The company must prove that it can maintain sales momentum, improve inventory availability, control costs, and keep shoppers engaged throughout the rest of fiscal 2026.

For investors, Target’s latest earnings report offers a more positive picture than previous quarters, but the next few quarters will be important in showing whether this improvement can become sustainable long-term growth.

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