NEW YORK, NY – JUNE 24: People walk past the Target store on 42nd Street in Times Square on June 24, 2025, in New York City. (Photo by Gary Hershorn/Getty Images)
Getty Images
For the second quarter in a row, Target delivered a positive sales report after digging itself into a deep hole, with revenues falling from $109.1 billion in 2022 to $104.8 billion in 2025. Second-quarter revenues ending the first of August rose 5.3% over last year—helped along by 17 new stores opened in the quarter—to $26.5 billion. More importantly, comparable sales climbed 3.8%.
Propelling growth was an 11% surge in hardline sales—Target’s “Fun 101” segment, which includes toys, gaming, music, collectibles, tech accessories and sporting goods—along with 7% gains in both beauty and food and beverage. Together, these three categories account for more than half of merchandise sales.
And they’re proving a powerful lure to draw new customers in and bring back former shoppers to see what newness Target has in store. Shoppers also have a more practical reason to visit: Target has reduced prices in more than 10,000 products over the past year. Notably 95% of its school supplies assortment is priced at or below last year’s levels.
Placer.ai reports Target foot traffic rose 4.7% year over year in the second quarter with July being its strongest month so far, with visits up 7.3%—early-bird back-to-school shopping may account for much of this as consumers lean into affordability as their top priority in what the National Retail Federation says will be a record-breaking shopping season.
Assuming shoppers find what they’re looking for—a reasonable assumption given the latest results—Target is counting on continued store remodels, elevated digital experiences and on-going enhancement in newness and design across apparel and home to set up a strong rest of the year.
Last year’s third and fourth quarters were disappointing, with sales down 1.5% in both periods and comparable sales falling 2.7% in the third quarter and 2.5% in the fourth. With positive tailwinds at its back—and lapping last year’s weak performance—Target has raised year-end guidance for a second time this year to around 5%, one percentage point higher than before. If it hits the mark, revenues will be ahead of when they peaked in 2022.
As CEO Michael Fiddelke tells it, Target is just getting started. “While there’s still meaningful work ahead, we’re encouraged by the progress we’re making and remain focused on executing with discipline, staying agile in a dynamic operating environment and investing in our team and capabilities to drive sustainable, profitable growth over the long term,” he said in a statement.
Target’s Four-Prong Turnaround Strategy
The company’s strategy back to sustainable growth is anchored in four key priorities: reclaiming merchandising authority, elevating the guest experience, accelerating technology and strengthening team execution and community impact.
In the second quarter, Fiddelke and his team made meaningful progress toward all of them—signals that the turnaround strategy is working.
Merchandising Authority To Rebuild the ‘Tar-Zahy’ Image
Target’s merchandising reset is designed to “move at the speed of culture,” as chief merchandising officer Cara Sylvester put it. She explained the keys are presenting a sharper curation, clearer point of view and newness with a value edge that feels distinctly Target.
Emphasizing progress to date, Sylvester admitted that home and apparel—two categories most tied to the Tar-zhay mystique—are not where they should be. Specifically, apparel and accessories revenues were flat at $4.1 billion, as were home furnishings and décor at $3.7 billion.
However, the company is setting the stage for a comeback. Kids’ basics posted double-digit growth and the Art Class tween brand rose 50%. Sylvester also pointed to the limited-time collaboration with women’s premium fashion brand LoveShackFancy—its largest design collaboration in history—for back-to-school girl’s clothing, accessories, school supplies and tech tools.
In home, nearly three-fourths of the decorative accessories assortment has been replaced. It will kick up selections in kids home and bedding in the third quarter and a major refresh to kitchen and dining assortments is coming in 2027.
One category has clearly reclaimed its merchandising authority: Fun 101, the old toy, sporting goods and tech departments. That transformation began late last year and is paying off in double-digit growth. Displays of TVs and bikes have been reimagined, and more space now is devoted to wearable tech, Lego, trading cards, and collectibles.
The results are showing. Target’s value-oriented Heyday $10 headphones jumped 35% over previous year. Lego sets climbed more than 30% and plush—now displayed on a Plush Wall—rose over 20%.
Adding to the joy: A Pokémon collaboration pulled in thousands of new guests and reinforced the Target’s leadership in fandom and collectibles.
Guest Experience To Be A Place Of Discovery
Food and beverage—Target’s largest segment at $6 billion this quarter—is undergoing its biggest transition in more than a decade. Nearly half of the center store grocery assortment has been re-presented, with new offerings, redesigned end-caps and in-aisle displays designed to make discovery easier.
It’s expanded selections in fresh produce, health and wellness, functional coffee, beverages and snacks. The addition of better-for-you offerings like protein bars and meat sticks helped snack sales climb more than 15% over last year.
“Our ambition is to make food a destination, not simply a category a guest shops while they’re in our stores, but a reason they choose to come to Target,” Sylvester said.
Coming next is a beauty makeover. The company is preparing 600 stores for the rollout of Target Beauty Studio, replacing the outgoing Ulta partnership.
Tech Acceleration Shows Results
Technology is becoming a core growth driver. Target just named a new chief AI officer, Chandhu Nair, to harness its power across the company. On that score, Target was an early adopter in agentic shopping through partnerships with OpenAI, Google Gemini and other platforms. Digital traffic sourced from external platforms grew 3.5 times faster than the industry.
Digital sales continue to grow with comparable online sales up 8.7% compared to a 2.7% increase in comp store sales. Same-day delivery from stores advanced more than 25%, with 95% fulfilled from stores.
And non-merchandise sales, including Roundel ad revenue, Target Circle membership and Target+ marketplace, are up over 20%, reinforcing the company’s digital strength.
Team & Community Through Store Renewal and Reliability
Operational excellence and community engagement is the fourth strategic pillar. Currently, 100 store remodels are underway with the goal of having 130 store transformations by end of year. The company noted that remodeled stores are seeing a lift to sales and traffic. The company has also opened 24 new stores this year, extending its reach into new communities and creating thousands of new jobs.
And investments in inventory reliability continue to ensure customers are not discouraged if they can’t find the items they want, whether in-store or online.
Committed To Sustainable Growth
Fiddelke capped his earnings presentation with a commitment to carry the turnaround strategy forward:
“We entered the year with a refreshed strategy to put us on a new trajectory—one of sustainable growth. That means serving the busy families that shop us with that Only-at-Target blend of style, design, quality and of course, incredible value.
“We aspire to be the place families can count on for what they need while also helping them discover what’s new, what’s next, and what will bring a little more joy to their everyday lives.”
Analysts Hold Their Applause
Despite a nearly 60% surge in Target’s stock this year and two quarters of positive growth, analysts aren’t ready to declare victory. The early signs are encouraging, but they are in a “wait and see” mode.
“It is important not to get too exuberant,” cautioned GlobalData’s Neil Saunders. Noting that store standards and in-stock levels are improving, he said achieving consistency across the chain is a work in progress.
Fiddelke acknowledged the challenge: “There’s healthy tension between the urgency of how much change to drive and our ability to execute that change well across 2,000 stores and a 400,000-person team.”
Saunders also observed that while the company is making necessary investments, it will put pressure on profits in the near term. That said, “If Target needs to take a step back in profit to boost the top line, it is a temporary sacrifice worth making.”
This quarter’s P&L got a one-time boost from a $994 million tariff refund—doubling net income and earnings per share—but analysts are looking under the hood for more reliable profit performance.
TD Cowen’s Oliver Chen shared Saunders’ cautious tone. “We come away incrementally encouraged by both the quarter and management’s commentary on back-to-school,” Chen wrote. “That said, we think durability of improvements remains only partially proven.”
Cowen maintains a Hold rating on the stock, pointing to questions about the company’s ability to sustain traffic growth and build a more durable earnings algorithm that investors can depend on.
The next two quarters may be the real tell. Saunders sees momentum building but is not ready to call it a full recovery.
“Overall, the numbers provide growing confidence that Target’s difficult years are ending. The recovery will not necessarily be even and smooth, but there’s a path forward now in a way that there wasn’t a couple of years back,” he concluded.
See Also: