Target’s Non-Merchandise Sales Jump 20% in Q2, Raising the Question of Whether It Can Lift Earnings

Target is leaning harder into revenue streams outside of merchandise, and the early read-through has been strong. In its fiscal 2026 second quarter, the company said non-merchandise sales rose 20.1%, according to a market report published by Yahoo Finance on Oct. 12, 2026. The report attributes the increase to growth across Roundel, Target+, and membership offerings.

Non-merchandise sales generally include items such as advertising and other third-party services, alongside subscription or membership-related revenue, rather than the sale of goods that Target ships to customers. For retailers, these lines can matter because they often have different cost structures than product sales, which can affect the path from top-line growth to earnings.

The Yahoo Finance report points to Roundel as a key driver. Roundel is Target’s advertising platform that helps brands reach Target customers across digital channels. In practical terms, faster growth in this segment can indicate stronger monetization of Target’s traffic and audience, which management typically views as a way to diversify results away from purely inventory and retail demand cycles.

Target+ is Target’s membership program, which combines benefits that can include exclusive offers and other perks. Membership can create a more predictable customer relationship, encouraging repeat shopping and potentially boosting engagement that also feeds advertising and other third-party revenue. The market report also highlights membership growth as part of the non-merchandise surge, suggesting that Target’s efforts to deepen retention may be bearing fruit in the revenue mix.

While the 20.1% growth figure strengthens the case for non-merchandise as an increasingly important component of Target’s business, the central question is whether it becomes a meaningfully larger earnings driver. The market report frames this as an open issue, implicitly focusing on whether higher non-merchandise revenue translates into higher operating profit, not just higher sales.

From a sector perspective, retailers have been trying to rebalance performance in an environment where discretionary spending can swing and where merchandise margins can be pressured by promotions and supply chain costs. Digital advertising and membership models are often seen as levers to stabilize or improve profitability, because they can be less dependent on clearance cycles and freight costs. Still, the degree to which these levers help depends on expenses tied to running the platform and servicing members, as well as the profitability of advertising demand.

In the Yahoo Finance piece, the focus is on the growth drivers themselves rather than on detailed margin impacts. The report does not, in the information provided here, spell out changes in gross margin, operating margin, or segment-level operating income for Roundel, Target+, or membership. It also does not specify how much of the 20.1% rise was driven by increased ad spending versus improvements in monetization per customer, or what the company is guiding for in future quarters.

Investors and analysts will likely watch for the next disclosures on whether the non-merchandise acceleration is broad-based and durable. Key items to monitor include any additional commentary on advertising demand and membership engagement, as well as how Target characterizes the profit contribution of these segments relative to merchandise. If Target can demonstrate that non-merchandise growth is improving earnings quality, it could make the business mix shift more persuasive beyond a single-quarter result.