Macy’s has outpaced Target in projected upside, driven by its luxury portfolio expansion and aggressive store optimization. Over the past 12 months, Macy’s comp sales in its top-tier Bloomingdale’s division rose 8.3%, compared with Target’s 4.1% increase in comparable-store sales. The retailer has also identified 20 underperforming locations for closure by year-end, expected to reduce operating expenses by approximately $45 million annually. Furthermore, Macy’s luxury assortment—now representing 22% of total revenue—grew by 18% year-over-year, bolstering its average transaction size by 12.5%. These factors have led analysts to raise Macy’s same-store profit forecast by 15% for fiscal 2026.

Target continues to leverage its private-label brands and omnichannel capabilities, though its upside may be more constrained. In 2025, Target’s private-label division delivered $14.2 billion in sales—up 9.8% year-over-year—with its Gigglescape line emerging as the fastest-growing private label, registering a 35% increase in household penetration. Digital sales accounted for 20.4% of total revenue, growing 11% in Q4 2025, but margin pressure from fulfillment costs narrowed e-commerce gross margins to 26.1%. Target has initiated a store optimization pilot, redesigning 50 locations to reduce footprint by an average of 8%, aiming to redeploy capital into higher-growth markets and enhance per-square-foot productivity by an estimated 6%.

Investors may favor Macy’s given its clearer earnings trajectory. Macy’s reported a 14% jump in operating income during Q4 2025, driven by tighter inventory controls and a 220-basis-point improvement in gross margin. It also reiterated guidance for fiscal 2026 operating margin expansion of 100–120 basis points. Target, while maintaining its full-year earnings per share outlook, is contending with elevated supply chain costs and a 50-basis-point year-over-year decline in operating margin in Q4. Analysts attribute Target’s weaker margin performance to increased fulfillment center expenses and promotional intensity in discretionary categories. Consequently, Macy’s consensus EBITDA growth forecast of 12% for 2026 surpasses Target’s 7% projection, underscoring the relative clarity of Macy’s path to upside.