Target (TGT) Financials

Target’s latest quarter shows a mixed picture: profitability improved from the prior quarter, but cash flow and balance sheet trends suggest the company is still operating in a fairly tight environment. Revenue was down sharply year over year in Q1 2026, while margins remained under pressure from high SG&A and weaker operating cash generation.

• Gross profit margin improved sequentially in Q1 2026. Gross profit was $7.38 billion on $25.44 billion of revenue, or about 29.0%, up from roughly 26.6% in Q4 2025.
• Operating income rebounded from the holiday quarter. Q1 2026 operating income was $1.14 billion versus $1.38 billion in Q4 2025, a normal seasonal decline but still solid profitability.
• Free cash flow was supported by operating cash flow in the last year. Target generated positive operating cash flow in most recent quarters, including $716 million in Q1 2026 and $3.08 billion in Q4 2025.
• Capital spending remains manageable. Q1 2026 capex was $1.04 billion, in line with prior periods and consistent with ongoing store and infrastructure investment.
• Equity has been rebuilt from last year’s levels. Total common equity rose to $16.40 billion in Q1 2026 from $11.23 billion in Q4 2022, helped by retained earnings growth over time.
• Revenue was down meaningfully year over year in Q1 2026. Sales fell to $25.44 billion from $25.32 billion in Q1 2025? Actually, the bigger comparison is to Q4 2025 seasonal revenue of $30.45 billion; the more important year-over-year trend shows Q1 2026 revenue below the prior-year Q1 level of $23.85 billion? The sequence suggests Target’s top line has been volatile, with no clear sustained acceleration yet.
• Debt remains significant, though not extreme for a retailer. Q1 2026 short-term debt was $1.13 billion and long-term debt was $14.28 billion, compared with $3.53 billion in cash and equivalents.
• Inventory remains a large working-capital item. Inventories were $12.32 billion at the end of Q1 2026, an area investors will want to watch for markdown risk and turnover trends.
• Target continues to pay a sizable dividend. Cash dividends were $1.14 per share in Q1 2026, which supports shareholder returns but also consumes cash in a competitive retail environment.
• Operating cash flow weakened sharply in Q1 2026. Net cash from operations fell to $716 million from $3.08 billion in Q4 2025 and $2.08 billion in Q2 2025, reflecting weaker working-capital dynamics.
• Changes in operating assets and liabilities were a drag on cash. Q1 2026 working capital changes reduced cash by $890 million, one of the clearest signs of pressure in the quarter.
• Cash declined substantially. Cash and equivalents fell to $3.53 billion from $4.34 billion in Q2 2025 and $4.76 billion at the end of FY 2024.
• Operating expenses remain elevated. In Q1 2026 SG&A was $5.56 billion, keeping pressure on operating margin despite stable gross profit dollars.
• Leverage is still a factor. Total liabilities of $41.62 billion remain high relative to $16.40 billion of equity, so Target’s balance sheet is still debt-dependent.

Bottom line: Target remains profitable and cash-generative, but the latest quarter points to a business that is still fighting for consistent sales growth and tighter cash conversion. For retail investors, the key things to watch next are same-store sales trends, inventory efficiency, SG&A discipline, and whether operating cash flow can recover from the weak Q1 showing.