Food, beauty highlight Target’s turnaround

Target’s turnaround is gaining traction, with big bets in categories like beauty and grocery driving strong sales in the retailer’s second quarter.

The retailer reported its second straight quarter of improving results this week, with net sales up 5.3% YoY, and comparable sales rising 3.8% thanks to a 3.6% bump in traffic. It also recorded a nearly $1 billion boost from tariff refunds.

“Our results show that our strategic choices, combined with the hard work of our team, are delivering change that is resonating with guests,” CEO Michael Fiddelke said on its earnings call.

Merchandise sales jumped 5%, with its six core categories all notching growth. Food and beverage and beauty were notable standouts, each seeing sales climb about 7% YoY.

Target just completed its “largest food transition in more than a decade,” Chief Merchandising Officer Cara Sylvester said. The retailer updated half its locations’ center-store grocery assortments, with new products along with refreshed end caps and in-aisle merchandising. It added additional fresh produce, more space for categories like snacks and global foods, she said. In stores that received the update, snack sales jumped 15%.

A Bloomberg report this week noted the retailer is also growing its grocery section’s size by 20% across 150 stores and 50% across 300 new stores. While eliminating some pantry staples, it has added 4,600 new items and 60+ new brands.

Later in the third quarter, Target is set to open its Target Beauty Studio across 600 stores, “a more elevated beauty destination” that would further establish the retailer “as an industry leader in this space,” Sylvester said. The new concept follows the official end of Target and Ulta Beauty’s shop-in-shop partnership this week. The retailer hasn’t shared exactly when and at which locations these studios will open.

Categories like home and apparel saw flat sales, which “isn’t what we strive for over time,” Fiddelke said. In Q2, it focused on kids apparel, and just reset 75% of its decorative accessories in its home set, which it hopes to boost sales.

CFO Jim Lee said the company has lowered prices on 10,000 items over the past year, with more to come this year. Given its H1 performance, Lee said the company will increase its full-year guidance for net sales growth one percentage point to 5%.