Target is winning back shoppers. Now it faces a big test.
Target’s bid to win back shoppers is gaining momentum as it tackles one of the most important shopping seasons of the year: back-to-school.
The Bullseye retailer said Wednesday that the early response to the annual stock-up on school and college supplies has been strong with several weeks still to go.
“It’s encouraging to see a strong consumer response to change where we’ve made it, but there’s a lot to come,” CEO Michael Fiddelke said during a call with reporters on Tuesday.
Fiddelke, who took over as CEO earlier this year, is working to get Target back into the good graces of shoppers after several years of lackluster company performance.
The retailer beat analyst expectations for its second quarter earnings, with net sales up 5.3% from the same period last year to $26.5 billion. Earnings also benefited from a nearly $1 billion tariff refund.
Comparable sales were up 3.8%, driven by higher customer visits, which the company attributed to refreshed merchandise, sharper store execution, and price cuts.
“This might be my favorite time of the year to be out in stores,” Fiddelke said on Tuesday’s call. “Back to school, back to college is our second biggest season, next only to holiday.”
Like the winter holidays, a successful back-to-school season depends on several complicated factors that Target has struggled with in recent years, such as fresh merchandise, well-stocked stores, and competitive pricing.
“It’s a place where executing the fundamentals so well matters so much,” Fiddelke told investors during Target’s earnings call on Wednesday. “We know we don’t win in a season where every school peaks at a different time if we don’t have inventory at the right place at the right time, and if we aren’t providing a great guest experience.”
The company said 95% of its back-to-school assortment this year is priced at or below last year’s retail prices.
But this period comes as US shoppers are increasingly out of cash and looking for value.
A survey from EY-Parthenon found that more than half of households didn’t save any money in June, while one-fifth of households tapped savings or took on debt to cover expenses.
“Target has a fighting chance to do well in back-to-school, but the season is looking quite tight and consumers are still very focused on value,” Global Data retail analyst Neil Saunders told Business Insider. “A win here is important as Target has said it wants to win with families — so back-to-school will be a real proof point.”
Target’s larger competitor Walmart reports earnings on Thursday, and will shed further light on how US shoppers are searching for value this year.