Target Corporation’s TGT second-quarter fiscal 2026 results highlighted a pivotal shift in its revenue mix, driven by rapid expansion in non-merchandise revenues. Total net sales grew 5.3% year over year to $26,539 million, reflecting a 5% gain in merchandise sales and a 20.1% surge in non-merchandise sales. This increase underscores the growing momentum and operational scaling of Target’s alternative, higher-margin business initiatives.
The growth in non-merchandise sales was driven by continued expansion across Roundel advertising, Target Circle 360 membership revenues and the Target+ marketplace, showing that revenue streams beyond traditional product sales are becoming more meaningful within the business.
The underlying momentum was broad. Management said Roundel gross billings rose nearly 20% from a year ago, while Target+ marketplace gross merchandise value increased more than 40%. Target Circle 360 membership revenues also climbed more than 40%. These businesses extend Target’s relationship with guests and brands beyond merchandise transactions, adding advertising, marketplace and membership income to the company’s sales base.
Advertising revenues of $279 million in the quarter jumped from $217 million a year earlier. Other revenues increased to $174 million from $141 million, while credit card profit sharing edged up to $139 million from $134 million. Together, these components helped non-merchandise sales grow, well ahead of merchandise sales.
By leveraging its digital footprint, brand affinity and store traffic, Target is effectively monetizing guest engagement beyond traditional retail transactions. The surge in non-merchandise sales demonstrates that these strategic platforms are rapidly scaling, generating high-margin revenues and playing an essential role in diversifying Target’s overall business model as digital commerce and retail media continue to evolve.
How Does Target Stack Up Against Its Industry?
Target, which competes with Dollar General Corporation DG and Costco Wholesale Corporation COST, has seen its shares rally 32.7% over the past three months against the industry’s 3.6% decline. While shares of Dollar General have risen 24.7%, those of Costco have fallen 6% in the aforementioned period.
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What Does Target’s Current Valuation Suggest?
From a valuation standpoint, Target's forward 12-month price-to-earnings ratio stands at 15.77, lower than the industry’s 29.13. However, the stock is trading above its 12-month median level of 14.89.
Target is trading at a discount to Costco (forward 12-month P/E of 40.71) and Dollar General (17.53).
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What Do Earnings Estimates Signal for Target?
The Zacks Consensus Estimate for Target’s earnings per share for the current and next fiscal year has increased by 16 cents and 9 cents to $10.43 and $9.36, respectively, over the past seven days.
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Target currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Target Corporation (TGT): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).