The news: Target changed more store space in the second quarter than in any quarter in the past decade. It reset nearly half its grocery aisles, rebuilt its toy and electronics floor, and replaced most of its home decor assortment.
Shelves usually go empty during work like that. But Target said availability on its most frequently bought items is the best it has been in years, and its overall reliability metrics hit multi-year highs.
Comparable sales grew 3.8% on 3.6% more traffic. A $994 million tariff refund doubled earnings per share; without it, EPS rose 20%.
During a reset, fixtures come down, shelf layouts change, and trucks hauling new fixtures and products compete with everyday restocking for trailers and dock doors. That is why CEO Michael Fiddelke called improving the shopping experience while making that much change “a tricky one-two punch.”
Four years ago, the same quarter went badly: Target held $15.3 billion of inventory in mid-2022 and spent the rest of that year marking it down. It held $13.2 billion this time, even though sales were slightly higher.
What changed: The work touched most of the store.
Nearly half of the center-store grocery aisles were reset, the biggest food change in more than a decade.
The Fun 101 area was rebuilt, as old TV and bike walls gave way to Lego, trading cards, collectibles and wearable tech.
About 75% of the home decor assortment was replaced.
More than 600 stores were prepared for next month’s Target Beauty Studio launch.
17 new stores opened, 24 this year, while more than 100 remodels are underway toward about 130.
The changes took place during back-to-school, one of Target’s biggest selling seasons. Getting it done, COO Lisa Roath said, took “thousands of decisions and countless overnight shifts.”
How it works: Target protected its shelves by starting early. It moved seasonal inventory into place before the resets began and set aside trucks for it, so store-change freight didn't crowd out regular restocking.
“By pre-positioning inventory and dedicating trailer capacity to key seasonal assortments, we improved product availability in our highest volume stores,” Roath said on the earnings call.
Because back-to-school products were moving through the same network at the same time, Target also changed how the products flowed. Better planning tools and closer work between the merchandising, supply chain and store teams, Roath said, let stores keep serving customers while the changes ran.
Target also tested changes before making them, using a tool called Proxima, a virtual copy of the system that decides how inventory moves from its warehouses to stores. In a fresh-food pilot across 63 items, Proxima lifted on-shelf availability 2.5%.
Deliveries sped up even as the work ran. Target fulfilled nearly 30% more same-day and next-day units than a year ago, and same-day delivery sales grew more than 25%.
The backdrop: The reset also leaned on a building program Target has been running since 2023.
Upstream of the stores, a new type of building in Houston called a Receive Center holds imported and seasonal products until stores need them. That lets Target buy early and still ship goods close to when they sell. The company expects the building to process about 25 million cartons a year.
In June, the company added its ninth food distribution center, in Thornton, Colorado, built to combine small vendor deliveries into full truckloads.
Closer to customers, Target is growing its sortation centers, which gather online orders from stores for faster delivery, to more than 15 by the end of the year. But stores still filled 97.6% of sales in the quarter.
Inventory turns rose more than 10% in the first quarter, before most of this work began. Jeff England, hired as the chief supply chain officer this year, is focused on simplifying how the teams work and making the network more productive, Roath said.
The counter: Some of the improvement came from spending more. Target added $945 million of inventory in the first half, against $141 million a year earlier, according to its cash-flow statement. CFO Jim Lee said the build supports growth plans and better in-stocks in the categories that sell fastest.
More store hours and training pushed SG&A costs up 30 basis points as a share of sales. Capital spending rose 27% in the quarter to $1.4 billion, on the way to about $5 billion this year.
Roath said the work isn’t finished: “Even with this progress, we still aren’t where we want to be.” The remaining gap, she said, is consistency across all stores and categories.
What’s next: Beauty Studio opens in more than 600 stores next month; bedding, kids home and bath change in the third quarter; and kitchen and dining follow in 2027. Fiddelke said plans are already set for 2027 and 2028 “in some of the places where lead times matter most.”
Because those fall resets run straight into the holiday peak, the next read on whether in-stocks hold comes with third-quarter results in November.
