Target improves on-shelf availability 150 bps for top 5,000 items with machine learning forecasting

Target's assortment spans essentials and discretionary categories — a combination that creates structurally different inventory risks under one roof. Inaccurate demand forecasting created risks of overstock in discretionary goods and out-of-stocks in essentials. Markdown exposure was a major drag on gross margin in the quarter. Target was already navigating declining comparable sales and a stock underperforming peers like Walmart.

Target invested in machine learning models that improve demand forecasting and inventory placement. The tools monitor product flow from supplier to shelf, making replenishment more accurate. This capability is part of Target's broader AI-driven operating model, alongside GenAI merchandising tools and market-based fulfillment orchestration. Target also expects roughly $4 billion in CapEx for the year toward technology, store, and fulfillment upgrades.

On-shelf availability for Target's top 5,000 items improved by more than 150 basis points year over year. The improvement was reported in the context of a challenging quarter with declining comparable sales.

• On-shelf availability: up more than 150 bps YoY for top 5,000 items
• Markdown exposure: Better forecasting helps reduce markdown exposure, which was a major drag on gross margin in the quarter
• P&L stability: Better forecasting and inventory positioning make the P&L more stable

• Prioritize ML forecasting at the top SKU tier first — gains are faster to measure and more defensible to the P&L.
• Inventory accuracy compounds when forecasting is connected to fulfillment routing and labor planning, not siloed as a standalone merchandising tool.
• Markdown reduction is a measurable ROI signal for forecasting investments — track it explicitly alongside availability metrics to capture the full margin case.
• Differentiating replenishment logic by category type (essentials vs. discretionary) matters at retail scale, since discretionary categories carry overstock risk while essentials carry out-of-stock risk.