Target's second quarter is the first sustained evidence that Michael Fiddelke's merchandising reset is bringing guests back after a multiyear traffic slump. Comparable sales rose 3.8 percent. Almost all of that gain came from more trips rather than richer baskets, which is the healthier way for a frequency retailer to recover. The print follows a first-quarter rebound and a March strategy meeting that recentered the chain on busy families, grocery, and everyday value. That is the operating story investors should isolate from the income statement.
Reported earnings doubled because the company booked a large International Emergency Economic Powers Act tariff refund after the February Supreme Court decision. The pretax credit was $994 million and added $1.65 to diluted earnings. Strip the refund and earnings still advanced, but at a far more ordinary pace that matches a retailer putting hours and capital back into stores. Gross margin outside the refund expanded as last year's heavy markdowns rolled off and advertising mix improved. Selling costs rose with field hours and incentive pay.
Management raised full-year sales growth to a range around 5 percent and lifted the earnings guide, while still embedding the refund in the new range. Home furnishings and apparel were essentially flat, the unfinished half of the assortment reset. The debate from here is whether holiday traffic and a clean operating margin near last year's adjusted rate plus a half point can stand without another customs windfall.