Dive Brief:
- Target’s second quarter net sales grew 5.3% year over year to $26.5 billion, according to an earnings release Wednesday. Comparable sales jumped 3.8% with a 3.6% increase in traffic, and net earnings improved over 100% to nearly $1.9 billion.
- Merchandise sales grew 5% while non-merchandise sales skyrocketed 20% in the quarter. Sales in all core merchandising categories grew, with the most growth within hardlines, beauty and food and beverage.
- Target raised its guidance, now expecting full-year net sales growth in a range around 5% compared to the previously projected 4% range outlook.
Dive Insight:
Target is cautiously optimistic about the turnaround progress it demonstrated this quarter. While all merchandise reported growth in the period, apparel and home categories saw lower rates of improvement.
“We knew a category like home was going to be a multiyear journey,” CEO Michael Fiddelke said on a media call Tuesday. “We changed 75% of our decorative accessories assortment. We've seen strong comps follow that change, but frankly, we need a lot more of that type of improvement in those two categories.”
Chief Merchandising Officer Cara Sylvester said the company is not satisfied with performance in both apparel and home, but added that Target is feeling more confident about what needs to evolve heading into 2027.
Industry analysts have previously noted how important the product categories are for Target.
“Reinstating merchandising authority in apparel & home (together ~30% of mix) will be essential to drive positive comps & improve still-negative traffic trends,” TD Cowen analysts led by Oliver Chen said in an emailed note in March.
Beauty’s success during the period comes as Target’s shop-in-shop partnership with Ulta Beauty ended on Sunday. Target plans to reveal its own Beauty Studio concept in Q3, Fiddelke added.
The retailer invested heavily in the business during Q2, with capital expenditures jumping 27% to $1.4 billion. The growth was mainly driven by store remodels and new stores, with the company opening 17 new locations during the period.
