Can AI-Driven Trend Forecasting Restore Target's Merchandising Edge?

Target Corporation TGT is positioning artificial intelligence as a foundational lever in its next merchandising cycle, with the goal of restoring design-led authority across discretionary categories. Management has emphasized that future growth will require sharper cultural awareness, stronger newness frequency and faster decision-making, supported by data.

The centerpiece of this shift is Target Trend Brain, a GenAI-powered platform that captures signals from social media, cultural moments, color trends and material patterns to help merchants identify emerging styles earlier. Complementing this is TGT’s synthetic audience engine, which simulates guest reactions to new designs and campaigns before launch.

By digitizing trend scouting and compressing development timelines, these tools are designed to eliminate guesswork and improve product-market alignment. The company emphasized that merchants now have real-time insights on what is resonating not just at Target, but across the broader industry. Early traction is visible in Fun 101, where curated cultural storytelling and trend-forward assortments drove nearly 10% growth in toys and double-digit gains in video games and sporting equipment in the third quarter of fiscal 2025.

To operationalize AI at scale, Target is reshaping its organizational architecture. Headquarters staffing has been reduced by about 1,800 roles, equal to 8% of its headquarters workforce, in order to streamline decision rights and accelerate the merchant workflow. Capital spending is planned at $4 billion in fiscal 2025 and $5 billion in fiscal 2026 to support category resets, store transformations and technology modernization across the fleet.

If AI-driven trend forecasting successfully enhances assortment discipline and creative execution, Target could rebuild the discretionary authority that historically differentiated its brand. Faster trend capture, higher hit rates and smarter newness frequency could collectively revive discretionary growth and position the company for a more competitive fiscal 2026.

WMT & BBY Expand AI Initiatives as TGT Enhances Its Platform

Walmart Inc. WMT is accelerating its AI efforts to deliver more personalized, multi-modal and context-aware experiences within its app in the third quarter of fiscal 2026. Walmart is also applying AI to software development — with over 40% of new code now AI-generated or AI-assisted — and to workforce development through OpenAI certifications and ChatGPT Enterprise access for associates.

In addition, Walmart is partnering with OpenAI to enable customers to purchase items directly through ChatGPT, creating a more seamless and connected shopping experience across channels.

Best Buy Co., Inc. BBY continued to advance its AI-driven digital transformation in the third quarter of fiscal 2026, integrating sophisticated intelligence across customer engagement and operational processes. Best Buy used AI to streamline customer support, cutting customer contacts by 17% while boosting satisfaction scores. AI is also enhancing product search, recommendations, personalized marketing and content enrichment across digital platforms.

Furthermore, Best Buy is expanding conversational AI and agentic commerce capabilities to simplify product discovery, checkout and fulfillment, reinforcing its role as a technology-driven omnichannel leader.

Target’s Price Performance, Valuation & Estimates

TGT stock has gained 20.8% in the past three months compared with the industry’s growth of 7.4%.

Target’s forward 12-month price-to-earnings ratio of 13.69 reflects a lower valuation than the industry’s average of 31.14. TGT has a Value Score of C.

The Zacks Consensus Estimate for TGT’s fiscal 2025 earnings implies a year-over-year decline of 17.7%, while the same for fiscal 2026 indicates growth of 6%. Earnings estimates for fiscal 2025 and 2026 have been southbound by 10 cents and 33 cents per share, respectively, in the past 60 days.

Target currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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