AI Is Becoming the Backbone of Target's Ambitious Retail Turnaround

Target Corporation TGT is increasingly relying on AI-powered inventory planning to address one of its most persistent challenges, inconsistent in-stock performance. As sales remain under pressure, management views inventory reliability as a foundational lever to improve the guest experience, protect market share and support a broader turnaround across stores and digital channels.

The company is modernizing the technology that forecasts, orders and positions inventory, using machine learning to optimize flow from suppliers to shelves. These systems are designed to improve accuracy on everyday, high-frequency items, ensuring the right product reaches the right location at the right time. Target has paired these tools with clearer measurements and process improvements to better identify root causes of out-of-stocks.

Early results suggest tangible progress. During the third quarter of fiscal 2025, on-shelf availability for Target’s 5,000 most important items, representing roughly 30% of total unit sales, improved by more than 150 basis points year over year. Management emphasized that the pace of improvement has accelerated each quarter, signaling the growing effectiveness of the new inventory planning approach.

AI is also reshaping decisions further upstream. Merchants now have access to real-time consumer insights, trend analytics and generative AI tools such as the company’s internal Trend Brain, which helps predict demand and guide buying decisions. By forecasting needs earlier and reacting faster to shifts in consumer behavior, Target aims to reduce mismatches that later lead to empty shelves.

While management acknowledges they are still below where guests expect them to be, sustained gains on the items that matter most could steadily rebuild trust. If AI-driven inventory planning continues to deliver consistent improvements, it may evolve from an operational fix into a competitive advantage, supporting traffic, loyalty and long-term growth for Target.

WMT & BBY Expand AI Initiatives as TGT Enhances Its Platform

Walmart Inc. WMT is accelerating 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 more than 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 29% in the past three months compared with the industry’s growth of 12.1%.

Target’s forward 12-month price-to-earnings ratio of 14.88 reflects a lower valuation than the industry’s average of 33.35. 

The Zacks Consensus Estimate for TGT’s fiscal 2025 earnings implies a year-over-year decline of 17.6%, while the same for fiscal 2026 indicates growth of 6.2%. Earnings estimates for fiscal 2025 and 2026 have been unchanged and upbound by 1 cent per share, respectively, in the past seven days.

Target currently carries a Zacks Rank #2 (Buy). 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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