Slash prices on milk, meat, and bread in this inflation-battered economy, and the consumer is going to notice while wandering the supermarket aisles.

That's especially the case for the deal-seeking Target (TGT) shopper.

The discount retailer shredded Wall Street profit forecasts by $0.39 on Wednesday on the back of renewed traffic to stores. Traffic increased by 3%, with all six departments at Target contributing to the improvement.

As Target CEO Brian Cornell tells it, the retailer's comeback quarter reflects a steady dose of price cuts this summer on 5,000 daily essentials — items where Target was losing market share to rival Walmart (WMT) for several quarters in a row.

"We feel great about the reaction that we're seeing from the consumer based on the 5,000 items where we've seen price reductions," Cornell told Yahoo Finance on a call with reporters. "It certainly contributed to traffic growth during the quarter — we expect that to continue over the balance of the year."

Cornell declined to say if more price cuts were coming.

Target stayed cautious with its full-year sales guidance as it enters the dueling peak seasons of back to school and the holidays. But it did lift its full-year profit forecast amid the second quarter beat and improved traffic trends.

"Walmart's second quarter earnings highlighted that value and convenience are resonating with consumers. We believe Target's heightened focus on value positions it well for [market] share gains going forward including improving price gaps and several new owned brand launches focused on value and entry level price points," Bank of America analyst Robbie Ohmes said in a client note.

The earnings rundown

• Net sales: +2.7% year over year to $25.5 billion, vs. estimates for $24.88 billion

• Gross profit margin: 28.9% vs. 27% a year ago, vs. estimates for 28%

• Diluted EPS: +43% year over year to $2.57, vs. estimates for $2.18 (guidance: $1.95 to $2.35)

• Comparable sales: +2% year over year (last year it fell 5.4%; Walmart US reported a 4.2% gain in the second quarter of 2024) vs -1.07% estimate

  • Digital comparable sales: 1.4%

  • Store comparable sales: -4.8%

What else caught our attention

• Inventory was relatively unchanged from the prior year.

• The company restarted stock buybacks, purchasing $155 million in the quarter. $9.5 billion remains available to repurchase under a prior authorization.

• The number of transactions rose 3% in the quarter, while the average transaction amount dropped 0.9%.

• Target ended the quarter with almost $3.5 billion in cash.

• Third quarter earnings per share are projected to be $2.20 to $2.40, vs. estimates for $2.24.

  • Comparable sales for the quarter are projected to be unchanged to up 2%.

• Full-year earnings per share are projected to be $9 to $9.70 (previous: $8.60 to $9.60), vs. estimates for $9.22.

Three times each week, I field insight-filled conversations with the biggest names in business and markets on my Opening Bid podcast. Find more episodes on our video hub. Watch on your preferred streaming service. Or listen and subscribe on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.

In the below Opening Bid episode, former Target board member and Medtronic (MDT) CEO Bill George shares what Starbucks (SBUX) and Boeing (BA) must do to turn themselves around.

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