Target's (TGT 1.23%) stock has been one of the biggest surprise winners of the pandemic. Its recent list of successes reads like a Wall Street wish list. Market share gains in an expanding industry? Check. Rising profit margins? Yes. Soaring cash returns? You bet.

It's no wonder that investors are feeling optimistic heading into the retailer's second quarter earnings report in just a few days. But that enthusiasm might lead to disappointment for shareholders if the company stumbles in the upcoming report.

With that backdrop in mind, let's look at some metrics to follow in Target's Aug. 18 earnings announcement.

Three young women shopping together at an outdoor mall.

Image source: Getty Images.

1. Market share

There's no doubt that investors are in for some head-turning sales numbers. Revenue should land at about $25 billion, according to Wall Street estimates, compared to $23 billion a year ago. Also keep in mind that the prior-year figure was up 25% due to soaring demand for staples and home supplies during the early days of the COVID-19 pandemic. Target is looking to put significant gains on top of that blockbuster performance.

Market share is the more important thing to watch, since that's been the key factor supporting the stock's epic run in the last year. Target has gained about $10 billion of new business since the pandemic began, and that's thanks to competitive advantages like its premium but affordable products, ultra-fast fulfillment, and multichannel selling platform. CEO Brian Cornell will likely give an updated estimate of that market share performance on Wednesday.

2. Margin questions

Sales spikes are nice to see, but it's that combined with rising profitability that's catapulted earnings into a higher gear in recent quarters. In contrast with peers like Walmart (NYSE: WMT), which focus more on consumer staples, the retailer has been able to take full advantage of shoppers' desire for premium merchandise, whether in the apparel, home furnishings, or electronics niches.

TGT Operating Margin (TTM) Chart

TGT Operating Margin (TTM) data by YCharts

Investors are worried that these good times might end because of inflation, slowing economic growth, or increased spending needs. That's why all eyes will be on Target's operating profit margin as the business heads into the second half of 2021. That figure touched double digits last quarter, but it's not yet clear where it will settle over the long term. The metric sat at roughly 6% in 2019, before the pandemic scrambled industry trends.

3. Looking out to the holidays

Target's outlook heading into this week's report calls for sales to rise as much as 9% in Q2, even following last year's 19% surge. Management might again decline to issue a full 2021 forecast due to all the uncertainty around the pandemic and consumer demand swings. But its Q3 outlook should be similarly bullish, especially if customer traffic trends were strong in recent weeks.

This is usually the time of year that Target starts making comments about the holiday season, but don't expect the same level of detail as previous years due to COVID-19 volatility. There's no shortage of risks to the Q4 outlook, including rising prices and new virus outbreaks. But the best indication investors will have will be Target's actual sales results this quarter and next quarter.

Meanwhile, the long-term outlook is bright for this attractive stock. Investors interested in growth don't have to wait for the earnings announcement before buying shares of one of the retail industry's biggest winners.