Will Target exclude transformation-related restructuring charges from adjusted EPS in FY2026?

The Enterprise Acceleration Office is a $2B multi-year program first announced Q1 FY2025, encompassing HQ restructuring (1,800 roles), supply chain optimization, and technology investment. Multi-year restructuring programs of this scale virtually never complete within a single fiscal year. Target has already established the precedent of excluding these costs from adjusted EPS in FY2025. Companies essentially never reverse non-GAAP adjustment methodology mid-program — doing so would create a discontinuity in the metric investors track and potentially trigger negative market reaction. The resolution criteria requires either stopping exclusions or having zero material charges — both are extremely unlikely in year 2 of a program designed to span multiple years.

Three structural factors drive a high probability: (1) The $2B cost savings target requires multi-year execution across HQ, supply chain, and technology — the 1,800 HQ job eliminations alone generate severance and transition costs that span quarters. (2) Target's adjusted EPS framework is established and communicated to analysts; reversing it would be management admitting the costs aren't truly one-time, which creates governance risk. (3) The unresolved DEF 14A compensation circularity concern (E1 evidence) suggests a potential incentive to maintain the exclusion if adjusted EPS is a performance metric. The only scenario for NO is if Target completes the entire transformation program by early FY2026 with zero residual charges — implausible for a program of this scope. Slight discount from maximum because there is a small possibility Target reclassifies some transformation costs as operational rather than excluded.

The committee established ACCOUNTING_INTEGRITY as QUESTIONABLE at E2 confidence with 2/2 agreement, specifically citing the adjusted EPS exclusion of multi-year transformation costs. The Fugazi Filter flagged that if these costs persist beyond FY2025, it would strengthen the case for CONCERNING — implicitly acknowledging the analysts' expectation that costs WILL persist. The program targets $2B across HQ restructuring, supply chain, and technology; by FY2026 at most 40-50% of savings may be realized, meaning transformation activities and associated costs continue. The slight discount from 0.90 reflects: (a) a small probability Target reclassifies some costs into COGS/SGA rather than as separate excluded items, and (b) a scenario where Target's board, aware of the Dividend Aristocrat governance pressure, decides to absorb remaining costs into GAAP to demonstrate earnings quality.

This is a straightforward structural question. Target launched a $2B multi-year transformation program in FY2025 with 1,800 HQ job cuts, supply chain optimization, and technology investment. They already exclude these costs from adjusted EPS. In FY2026 — only the second year — there will unquestionably be ongoing transformation costs (severance tail, technology implementation, supply chain reorganization). And Target will unquestionably continue excluding them from adjusted EPS because that's the established methodology. The only path to NO is if the entire program wraps up with zero residual charges, which is implausible for a program of this magnitude.

The analysis facts make this relatively clear-cut. Enterprise Acceleration Office transformation costs are excluded from FY2025 adjusted EPS ($7-$8 guidance). The program targets $2B in cost savings across three major workstreams — HQ restructuring, supply chain, and technology. Multi-year by design. In FY2026, Target will still be executing on supply chain optimization and technology investment even if HQ headcount reductions are largely complete. These costs will continue to be excluded from adjusted EPS because: (1) consistency in non-GAAP methodology is an SEC expectation, (2) management has no incentive to change, (3) the program hasn't concluded. Minor discount for the possibility that transformation costs become immaterial in FY2026 and Target quietly stops mentioning them.

The committee's own monitoring trigger explicitly states: 'Restructuring charges in FY2026+ financial statements — recurring one-time charges would argue for CONCERNING.' This trigger was designed because the committee EXPECTED these charges to persist. The $2B program with 1,800 job eliminations, supply chain optimization, and technology investment is a multi-year endeavor by construction. Target will continue to exclude transformation costs from adjusted EPS in FY2026 because: the costs will exist (program ongoing), and the methodology is established (FY2025 precedent). The compensation circularity concern (E1) adds a governance dimension — if adjusted EPS is a compensation metric, there's an active disincentive to stop excluding.

$2B multi-year transformation program. FY2025 already excludes costs from adjusted EPS. FY2026 is year 2 — costs will persist. Companies don't reverse non-GAAP methodology mid-program. High probability YES.

Enterprise Acceleration Office: $2B target, 1,800 job cuts, supply chain + technology. Multi-year by design. FY2025 adjusted EPS excludes these costs. In FY2026, transformation activities continue and costs will be excluded. Only NO scenario: program fully completes by FY2025 end with zero residual charges — extremely unlikely for this scope. Small discount for possibility costs become immaterial.

Strong base case for YES: multi-year program, established exclusion, ongoing costs. Slight caution: if Target's transformation program front-loads costs heavily in FY2025, FY2026 charges could be smaller than expected. But 'material' is the key word in resolution — even smaller charges would likely still be excluded from adjusted EPS. The resolution requires NO material charges OR stopping exclusions — both unlikely.