The quarter was better not just because sales improved, but because the improvement came from several places at once. Target said comparable sales rose 5.6%, with traffic up 4.4% and average transaction size up 1.1%, per the Target press release (May 20, 2026). That matters because it shows the lift was not coming from one odd pricing move or a single hot category.

Management also said topline strength was broad-based across merchandise categories, sales channels and across the quarter, Target said (May 20, 2026). Net sales in all six core merchandising categories were higher than a year ago, which is the sort of detail that helps make a rebound look less flimsy than it might at first glance, the company confirmed (May 20, 2026).

Digital helped too. Digital comparable sales grew 8.9%, led by more than 27% growth in same-day delivery powered by Target Circle 360, per the Target press release (May 20, 2026). Stores were not left behind, either: store-originated comparable sales rose 4.7%, Target reported (May 20, 2026).

Non-merchandise revenue played a bigger role than usual. Target’s release said non-merchandise sales rose 24.6%, while CNBC noted gains in membership revenue and the Target+ marketplace, per CNBC (May 20, 2026). Those streams do not grab headlines the way apparel or toys do, but they helped support gross margin.

The profit picture is more complicated than the sales line suggests. On an adjusted basis, operating income rose 29.1% year over year, but on a GAAP basis it fell 22.9%, according to the Target earnings release (May 20, 2026). The company attributed the gap to prior-year results that included non-recurring legal settlement gains, per the release (May 20, 2026).

That is why GAAP net earnings dropped to $781 million from $1.04 billion, even as the adjusted picture improved, per the Target earnings release (May 20, 2026). Adjusted EPS was $1.71, up 32% from $1.30 a year earlier, according to the release (May 20, 2026).

Gross margin rose to 29.0% from 28.2%, helped by supply chain productivity, advertising and other non-merchandise revenue, and lower markdown rates, partly offset by higher product costs, per the Target press release (May 20, 2026). SG&A as a share of sales edged up to 21.9% from an adjusted 21.7% a year earlier, the company reported (May 20, 2026). The turnaround is getting traction, but it is still chewing through resources.

Capital efficiency tells a similar story. After-tax return on invested capital fell to 12.4% for the trailing 12 months through the quarter, from 15.1% in the comparable period a year earlier, Target reported (May 20, 2026). That does not signal operational collapse. It does mean the repair job is expensive.

Target is not pretending otherwise. Capital expenditures in the quarter reached $1.0 billion, up 31% from a year ago, driven mainly by new stores and remodels, per the earnings release (May 20, 2026). Full-year capex is expected to reach $5 billion, more than $1 billion above last fiscal year, CNBC reported (May 20, 2026).

That spending has a purpose. Management pointed to what it called its largest food and beverage transition in more than a decade, the rollout of Target Beauty Studio to more than 600 stores, and a broader shift in what Target sells and how it sells it in 2026, CNBC reported (May 20, 2026). CEO Michael Fiddelke said the company expects to make more change this year than it has in a decade, CNBC reported (May 20, 2026).

Morningstar took a measured view. It said it plans to raise its $121 fair value estimate for no-moat Target by a low-single-digit percentage after the stronger-than-expected quarter, but it also said the $5 billion capital spending plan is necessary rather than a path to materially faster long-term growth, Morningstar noted (May 20, 2026). That is about as clean a summary of the investor debate as there is: the spending looks justified, but it does not make the valuation problem disappear.

Target management also kept the macro caveat in view. CFO Jim Lee said the company is still working through tariff refunds and that the tariff environment remains dynamic, adding that it is early to determine the margin impact, per CNBC (May 20, 2026). In other words, the year is off to a better start, but the road is still messy.

The market’s first reaction was cautious for a reason. Target shares fell nearly 4% on the day of the report despite the beat and raised guidance, according to CNBC (May 20, 2026). Morningstar also noted the stock is up 19% year to date, ahead of the Morningstar US Consumer Defensive Index at 12%, Morningstar noted (May 20, 2026).

The wider consumer picture still deserves attention, even if this article stays centered on Target. A separate SimianX analysis said the U.S. consumer is not collapsing, but does look more fragile, with Walmart’s smaller gasoline fill-ups cited as a sign of stress among budget-conscious shoppers, SimianX observed (May 22, 2026). That is not Target-specific evidence, but it does frame the backdrop: value demand is holding up, while confidence remains uneven.

The next checkpoints are straightforward. Investors will want to see whether second-quarter comparable sales hold up, whether the grocery reset and beauty studio rollout keep pulling traffic, and whether the company can turn a heavy investment cycle into margin expansion rather than just spending, per the Target press release (May 20, 2026). Target has earned some credibility back. It has not earned a reprieve.