Can Remodeling Efforts Revive Target's In-Store Traffic Trends?

Target Corporation’s TGT first-quarter fiscal 2025 results revealed a comparable store sales decline of 5.7%, indicating ongoing challenges in driving in-store visits. Despite these headwinds, the company remains committed to investing in its physical stores, including ongoing remodels of existing locations. 

To better adapt to changing consumer trends, Target is redesigning store layouts to enhance both customer experience and operational efficiency. The remodeling efforts focus on creating a seamless shopping experience while boosting support for same-day services like Drive Up and Order Pickup. Improved layouts, better digital integration and updated product selections, especially affordable seasonal items, are key parts of this transformation. 

Management highlighted that for store remodels completed in recent years, they have observed "strong comp lifts" of 2% to 4% in the year following a remodel, with an additional nearly 3% incremental lift in year two. This suggests that guests respond positively to updated in-store experiences. Target also added three new store locations in the first quarter and plans to open around 20 stores in the current fiscal year, emphasizing its belief in the physical footprint.

While digital comparable sales grew 4.7%, the significant decline in store-originated sales underscores the urgency for physical store revitalization. The continued investment in remodels, backed by historical positive sales lifts, is a key strategy for Target to re-engage shoppers and potentially reverse the downward trend in in-store traffic. The success of these efforts is pivotal in integrating digital platforms with brick-and-mortar.

TGT Remodels to Regain Shoppers as DG & SFM Gain Ground

Dollar General Corporation DG reported a 2.4% increase in first-quarter fiscal 2025 same-store sales, driven by a 2.7% rise in the average transaction amount, though partially offset by a 0.3% decline in customer traffic. Dollar General saw growth across all key product categories, including consumables, seasonal, home products and apparel. Dollar General now expects same-store sales to rise between 1.5% and 2.5% compared to its prior forecast of 1.2% to 2.2%.

Sprouts Farmers Market, Inc. SFM is showing that store-level investment and strategic enhancements can pay off, as evidenced by its impressive 11.7% comparable store sales growth in the first quarter of 2025. Sprouts Farmers is benefiting from stronger foot traffic, supported by e-commerce gains and targeted merchandising. With a focus on supply-chain upgrades and private-label expansion, Sprouts Farmers continues to drive in-store engagement and loyalty, positioning itself as a standout player in the evolving retail landscape.

Target’s Price Performance, Valuation and Estimates

Target stock has risen 4% over the past three months compared with the industry’s growth of 3.7%. 
 

Target’s forward 12-month price-to-earnings ratio of 13.01 reflects a lower valuation compared with the industry’s average of 32.58X. TGT carries a Value Score of A.
 

The Zacks Consensus Estimate for Target’s current financial-year sales and earnings per share implies a year-over-year decline of 1.8% and 14.8%, respectively. 
 

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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