Target 2026 Plan Looks Expensive In A Good Way

With the company still working out a post-boom hangover in discretionary categories - and traffic that hasn’t consistently cooperated - Target’s latest quarter hinted that the base is beginning to firm up. Fourth-quarter net sales were $30.45 billion, down 1.5% year over year, and comparable sales fell 2.5% (stores -3.9%, digital +1.9%). Still, profitability landed where investors actually look first: GAAP EPS was $2.30 (including $0.15 of transformation costs) and adjusted EPS was $2.44. Target also said sales and traffic trends accelerated in the last two months of the quarter, and non-merchandise revenue had some real momentum, with non-merchandise sales up over 25% and membership revenue more than doubling from a year ago. Target didn’t declare the turnaround finished — it just showed the first signs a turnaround is on the horizon.

Target is making 2026 all about execution, with guidance that sketches a path back to growth and slightly better profitability. The company guided to net sales growth around 2% versus 2025, with a small increase in comparable sales and more than one point of growth expected from new stores and non-merchandise revenue. It also expects a full-year operating income margin rate about 20 bps higher than 2025’s 4.6% adjusted operating margin rate. On the bottom line, Target guided GAAP and adjusted EPS of $7.50 to $8.50, and said Q1 EPS should be flat to up slightly versus last year’s $1.30 adjusted EPS, with stronger year-over-year growth expected later in the year.

Target’s recovery effort gets concrete in the details, with store openings, remodels, and merchandising resets designed to lift traffic and basket size. To get the engine humming again, the company is planning an incremental $2 billion of investment in 2026, including more than $1 billion in additional capital expenditures and $1 billion in additional operating investments. Its broader capital plan also calls for 30 new stores and investing in over 130 full-store remodels. Rather than reinventing the wheel, the reset is about sharpening what already works. Target plans to overhaul 75% of its decorative home accessories while reworking brands like Threshold, accelerate product cycles in apparel, and expand Target Beauty Studio to 600+ stores later this year.

Target’s recovery trade comes down to whether the company can buy back momentum without blowing up margins. If traffic keeps improving and digital holds its ground, the investment should show up as a better in-store experience. The market has room to keep rerating, provided the comps and margin trend keep improving. The plan is credible, but the verdict comes down to whether the investment shows up in cleaner execution and steadier demand.

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