Target's grocery overhaul is helping it win back customers

By Bill Peters

The retailer has added more snacks and changed its presentation as it tries to become a destination for food purchases

Target increased its full-year outlook on Wednesday.

As Target proceeds with its turnaround plan, the big-box retailer is betting on things like an ambitious grocery-section revamp, more snacks and new Legos.

Those initiatives are starting to pay off - enough that Target (TGT) boosted its forecast for the full year. The retailer shared that it has been winning back inflation-fatigued customers, who over recent years have migrated to rivals in search of better deals on groceries and other household basics.

Target also reported better-than-expected results for its second quarter on Wednesday. While tariff refunds juiced profits, traffic and same-store sales - sales in a store open more than a year - were up during the period.

"Seeing our growth fueled by traffic is especially encouraging, as it's evidence guests are choosing Target more often," CEO Michael Fiddelke said on a call with reporters a day before the results.

Against that backdrop, Target on Wednesday said it expects full-year sales growth of around 5%. That's a percentage point higher than its previous forecast.

The stock is up more than 1% in Wednesday morning action.

Target reported its quarterly financials a day ahead of Walmart's (WMT) earnings. Taken together, the reports will serve as an update on the health of consumers, who are grappling with higher costs for gas, energy and other essentials.

Over the years, Target has relied less on groceries and household staples than Walmart to drive sales. But Target executives said on their call that they are trying to refashion the chain into a bigger destination for groceries.

Target has changed the presentation of nearly half of its center-aisle groceries, adding more space for snacks and newer products. Cara Sylvester, Target's chief merchandising officer, said on the media call that those changes represented the biggest reset of its dry-grocery section in more than a decade.

Offerings geared toward wellness and the ongoing protein trend have done well, she said. After the changes, snack sales were up 15% from a year before. She said the company's goal was to "move our food business from a basket-builder and a 'while you're at Target' to actually a reason why you come to Target."

Meanwhile, things like Legos and plush toys saw double-digit same-store sales gains in the second quarter. And Target's beauty studios will appear in more stores over the third quarter.

Still, Fiddelke said during the call that clothing and home goods are the categories most in need of improvement.

Sylvester said the company needs to be better about staying on top of trends and having a sharper, tighter clothing selection. It also needs to have the sourcing capabilities to meet fluctuations in shoppers' tastes.

She said Target was "in the early stages of a multiyear journey" to get home goods back on track. The company has changed out 75% of its assortment of decorative accessories, a move that has attracted customers, but management cited a need to fine-tune the home section.

Target on Wednesday said it now expects to earn $9.90 to $10.90 for the year, with $1.65 coming from tariff refunds in the second quarter. Without those refunds, the midpoint of Target's outlook would be 75 cents higher than a prior forecast of $7.50 to $8.50.

During the second quarter, same-store sales rose 3.8%, helped by digital sales gains and a 3.6% uptick in consumer foot traffic. The same-store-sales figure topped FactSet estimates for a 2.4% increase.

Revenue rose 5.3% year over year to $26.5 billion, above analyst estimates for $26.1 billion. Target's second-quarter earnings per share roughly doubled to $4.11 a share, as tariff refunds kicked in. Wall Street was expecting $2.34 a share.

The Supreme Court struck down President Donald Trump's emergency-use tariffs earlier this year.

-Bill Peters

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08-19-26 0934ET