Target(TGT) - 2026 Q2 - Quarterly Results

Executive Summary & Key Highlights Second Quarter 2025 Performance Overview Target's Q2 2025 GAAP and Adjusted EPS decreased to $2.05, with net sales of $25.2 billion (down 0.9%), showing improved traffic and digital sales growth Second Quarter 2025 Key Financial Highlights | Metric | Q2 2025 | Q2 2024 | Change (%) | | :-------------------------------- | :------ | :------ | :--------- | | GAAP and Adjusted EPS (Diluted) | $2.05 | $2.57 | (20.2)% | | Net Sales | $25.2 B | $25.45 B| (0.9)% | | Digital Comparable Sales Growth | 4.3% | - | - | | Non-Merchandise Sales Growth | 14.2% | - | - | - Traffic and sales trends improved meaningfully compared with the first quarter, particularly in stores, with all six core merchandising categories seeing comparable sales improvements[2] - Strong expense management and efficiency gains helped offset continued tariff-related and other cost pressures[2] Leadership Appointment Target's Board of Directors unanimously appointed Michael Fiddelke as the next CEO, with current CEO Brian Cornell expressing full confidence in his leadership - Michael Fiddelke unanimously appointed as Target's next CEO by the Board of Directors[1][3] - Brian Cornell expressed full confidence in Fiddelke's leadership to drive improved results and sustainable growth, citing his deep understanding of the business and critical role in establishing differentiated capabilities[3] Fiscal Year 2025 Guidance For fiscal 2025, Target maintains its expectation of a low-single digit decline in sales, with GAAP EPS projected between $8.00 and $10.00 Fiscal Year 2025 Guidance | Metric | Guidance | | :-------------------------------- | :---------------- | | Sales Decline | Low-single digit | | GAAP EPS | $8.00 - $10.00 | | Adjusted EPS (excluding Q1 gains) | ~$7.00 - $9.00 | Financial Performance Analysis Consolidated Statements of Operations Target's Q2 2025 consolidated operations show a 0.9% net sales decrease to $25.2 billion, leading to a 19.4% decline in operating income and a 21.5% decrease in net earnings Consolidated Statements of Operations (Three Months Ended) | Metric (millions) | August 2, 2025 | August 3, 2024 | Change (%) | | :-------------------------------- | :------------- | :------------- | :--------- | | Net sales | $25,211 | $25,452 | (0.9)% | | Cost of sales | $17,903 | $17,826 | 0.4% | | Selling, general and administrative expenses | $5,359 | $5,365 | (0.1)% | | Operating income | $1,317 | $1,635 | (19.4)% | | Net earnings | $935 | $1,192 | (21.5)% | | Diluted earnings per share | $2.05 | $2.57 | (20.2)% | Net Sales and Revenue Breakdown Merchandise sales decreased by 1.2% in Q2 2025, partially offset by a 14.2% increase in non-merchandise sales, with varied performance across categories Net Sales Breakdown (Three Months Ended) | Category (millions) | August 2, 2025 | August 3, 2024 | Change (%) | | :-------------------------------- | :------------- | :------------- | :--------- | | Merchandise sales | $24,719 | $25,021 | (1.2)% | | Advertising revenue (Roundel) | $217 | $162 | 34.0% | | Credit card profit sharing | $134 | $144 | (6.9)% | | Other non-merchandise sales | $141 | $125 | 12.8% | | Total Net Sales | $25,211 | $25,452 | (0.9)% | Merchandise Sales by Category (Three Months Ended) | Category (millions) | August 2, 2025 | August 3, 2024 | Change (%) | | :-------------------------------- | :------------- | :------------- | :--------- | | Apparel & accessories | $4,086 | $4,261 | (4.1)% | | Beauty | $3,396 | $3,384 | 0.4% | | Food & beverage | $5,588 | $5,538 | 0.9% | | Hardlines | $3,522 | $3,322 | 6.0% | | Home furnishings & décor | $3,662 | $3,908 | (6.3)% | | Household essentials | $4,422 | $4,564 | (3.0)% | Profitability and Margins The operating income margin rate for Q2 2025 decreased to 5.2% from 6.4%, primarily due to a lower gross margin rate despite disciplined SG&A expense management Margin Rates (Three Months Ended) | Metric | August 2, 2025 | August 3, 2024 | Change (pp) | | :-------------------------------- | :------------- | :------------- | :---------- | | Operating income margin rate | 5.2% | 6.4% | (1.2) | | Gross margin rate | 29.0% | 30.0% | (1.0) | | SG&A expense rate | 21.3% | 21.1% | 0.2 | - Gross margin rate decline was due to higher markdown rates, purchase order cancellation costs, and pressure from category mix, partially offset by lower inventory shrink and growth in advertising and non-merchandise sales[7] - SG&A expenses were 0.1% lower than in 2024, driven by disciplined cost management offsetting increased investments in store remodels and general cost increases[7] Earnings Per Share Diluted EPS for Q2 2025 was $2.05, a 20.2% decrease from $2.57 in Q2 2024, reflecting the overall decline in net earnings Earnings Per Share (Three Months Ended) | Metric | August 2, 2025 | August 3, 2024 | Change (%) | | :-------------------------------- | :------------- | :------------- | :--------- | | Basic earnings per share | $2.06 | $2.58 | (20.2)% | | Diluted earnings per share | $2.05 | $2.57 | (20.2)% | | Weighted average common shares outstanding (Diluted) | 455.6 million | 463.5 million | (1.7)% | Consolidated Statements of Financial Position As of August 2, 2025, Target reported total assets of $57.85 billion, a slight increase, with inventory up and long-term debt rising to $15.32 billion Consolidated Statements of Financial Position (Selected Data) | Metric (millions) | August 2, 2025 | February 1, 2025 | August 3, 2024 | | :-------------------------------- | :------------- | :--------------- | :------------- | | Cash and cash equivalents | $4,341 | $4,762 | $3,497 | | Inventory | $12,881 | $12,740 | $12,604 | | Total assets | $57,851 | $57,769 | $55,995 | | Total current liabilities | $19,223 | $20,799 | $19,984 | | Long-term debt and other borrowings | $15,320 | $14,304 | $13,654 | | Total shareholders' investment | $15,420 | $14,666 | $14,429 | Consolidated Statements of Cash Flows For the six months ended August 2, 2025, cash provided by operating activities decreased to $2.36 billion, while investing activities required more cash, and financing activities showed improved outflow Consolidated Statements of Cash Flows (Six Months Ended) | Metric (millions) | August 2, 2025 | August 3, 2024 | | :-------------------------------- | :------------- | :------------- | | Cash provided by operating activities | $2,358 | $3,339 | | Cash required for investing activities | ($1,853) | ($1,305) | | Cash required for financing activities | ($926) | ($2,342) | | Net decrease in cash and cash equivalents | ($421) | ($308) | | Cash and cash equivalents at end of period | $4,341 |