Target lifts outlook: 3.8% comps, $994M tariff refund

For investors, Target's Q2 print is a tale of two tailwinds—operating momentum and a one-time $994 million tariff refund. Comparable sales rose 3.8% and management raised the annual outlook, but the refund must be separated from core profitability. The question now is whether price cuts on 10,000+ items are building sustainable market share or simply buying traffic with windfall cash.

Target delivered its second consecutive quarter of positive comparable sales on August 19, 2026, reporting a 3.8% increase in comps for the fiscal second quarter. That follows a 5.6% jump in the first quarter and stands in sharp contrast to the 1.9% decline in the year-earlier quarter and a 3.8% drop for all of 2025. The retailer attributed the improvement to a merchandising overhaul under new CEO Fiddelke, which is bringing more newness to shelves and drawing more shoppers into both stores and digital channels. More than half of Target's back-to-school merchandise is new, including a limited-time collection of teen and tween clothes, school supplies and accessories in pastel and floral prints. Customer traffic increased from May through July, the company said.

“

That follows a 5.6% jump in the first quarter and stands in sharp contrast to the 1.9% decline in the year-earlier quarter and a 3.8% drop for all of 2025.

Also boosting the quarter was a $994 million tariff refund after the U.S. Supreme Court ruled this year that the Trump administration overstepped its authority when the tariffs were implemented. The windfall has raised questions across retail about whether refunds will be used to lower prices or support margins. Target CFO Jim Lee said this week the company continues to invest in lowering prices, noting it has reduced prices on more than 10,000 items over the past year and that "there's more to come even as we're facing headwinds overall." That price investment is central to the comeback: lower prices, combined with fresh merchandise, are giving consumers a reason to return to Target after more than a year of weak comparable sales. Target did not disclose how much of the refund hits net income, but CFO Jim Lee's comment that the company continues to invest in lowering prices suggests at least a portion is being deployed to fund price cuts, which matters for investors separating one-time benefits from core retail execution.

The $6 billion plan unveiled in March by Fiddelke is the strategic framework. It aims to reverse the sales slump and reclaim Target's reputation as a destination for affordable yet stylish apparel and home goods. The early results suggest the plan is working, but management remains cautious. "We're encouraged by the progress made so far, and we're also clear-eyed about the important work still ahead," Fiddelke said. Upgraded annual profit and sales outlooks reflect confidence built during the first half, but the second half includes the critical back-to-school and holiday seasons, where execution will be tested.