The news: Target boosted its full-year outlook after a better-than-expected Q2 as refreshed assortments, store upgrades, and improved customer service gained traction with shoppers.

• Net sales rose 5.3% YoY to $26.54 billion, ahead of expectations for $26.14 billion.
• Comparable sales rose 3.8% YoY, marking the first time since 2024 the retailer has posted consecutive quarters of same-store growth.
• Adjusted earnings per share doubled YoY to $4.11, aided by nearly $1 billion in tariff refunds received during the quarter.

The retailer now expects full-year sales to grow 5% YoY, 1 percentage point above its prior forecast.

Behind the numbers: Target’s investments in on-trend and affordable merchandise, revamped stores, and better customer service appear to be bringing shoppers back. CEO Michael Fiddelke noted that customer satisfaction scores have risen to levels not seen “in many years.” The retailer cut prices on over 10,000 products in the past year—helped in part by its tariff refunds—and expects to continue doing so.

While net sales grew across Target’s six core merchandising categories, performance was uneven.

• Fun 101, which includes toys, collectibles, and electronics, posted double-digit growth after the company reconfigured store layouts, expanded lower-priced products, and added partnerships with popular brands like Lego and Pokemon.
• Food and beverage sales rose by high-single digits as Target refreshed store displays and overhauled its assortment around on-trend products, fresh produce, and seasonal items.
• Apparel and home, however, performed below expectations, showing that merchandising challenges remain.

Zoom out: While Target acknowledged the importance of ecommerce and AI to its business, most of the retailer’s growth initiatives center on its stores.

• The company opened 17 locations in Q2 and is on track to complete 130 store remodels this year to better highlight key categories like grocery and Fun 101 and improve the guest experience.
• The retailer will add 600 Target Beauty Studios to stores this year to fill the void left by the dissolution of its partnership with Ulta.
• Target is also investing in employee training and technology to ensure better, more consistent customer service and improve efficiency.

These moves are showing early results: Store traffic rose 3.8% in Q2, while comparable store sales increased 2.7%, the second-consecutive quarter of growth for both metrics.

Implications for retail: Target’s performance shows that consumers continue to respond positively to newness, trend-forward and affordable products, and enhanced store experiences.

However, weakness in key categories like apparel and home shows there’s more work needed to regain its merchandising authority, although popular collaborations with the likes of LoveShackFancy and Rosie Assoulin could be helping to slowly move the needle.