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NEW YORK (AP) — Target reported a second straight quarter of comparable sales gains on Wednesday, saying that a merchandising overhaul under the retailer’s new CEO attracted more customers and boosted sales both in stores and online.

The mass-market discount retailer also benefited from a tariff refund of $994 million after the U.S. Supreme Court ruled this year that President Donald Trump overstepped his authority when he imposed double-digit import taxes on goods from most other countries.

There is a lot of interest in how tariff refunds from the U.S. government will impact retailers and whether those refunds will be used to lower prices for customers.

Chief Financial Officer Jim Lee, when asked about tariff refunds this week, said the company continues to invest in lowering prices. Target reduced the prices of more than 10,000 items over the past year and “there’s more to come even as we’re facing headwinds overall,” Lee said.

Comparable sales, those coming from stores and digital channels operating for at least 12 months, rose 3.8% in the second quarter. The company also upgraded its annual profit and sales outlook, citing the solid performance during the first half of the year.

Target is emerging from more than a year of weak comparable sales. It started off 2025 with a 3.8% decline, but recorded a 5.6% jump in the first quarter of this year. The second-quarter gain offset a 1.9% drop during the same three months last year.

Target CEO Michael Fiddelke, a 20-year company veteran who became chief executive in February, said the latest quarter was “an important step forward in the plan we laid out earlier this year to open a new chapter of growth for Target.”

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Target also reported an increase in the number of customers going to its stores and shopping on its website from May through July.

“We’re encouraged by the progress made so far, and we’re also clear-eyed about the important work still ahead,” Fiddelke said.

In March, Fiddelke unveiled a $6 billion plan to reverse Target’s sales slump and to reclaim the retailer’s reputation as a place to go for affordable yet stylish apparel and home goods.

More than half of Target’s back-to-school merchandise is new, the company said.

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That includes a limited-time collection of teen and tween clothes, school supplies and accessories in pastel colors and floral prints from the women’s lifestyle brand LoveShack Fancy. Target also collaborated with Hollister on a dorm decor collection.

Target recruited fashion designer and TV personality Isaac Mizrahi this summer to fill the newly created role of creative director at large. Mizrahi has been brought in to mentor Target designers, advise on product design and innovation, and forge new partnerships.

It is Mizrahi’s second partnership with Target. He became the first major fashion designer to collaborate with the retailer in 2003 for a successful run.

Fiddelke is also remodeling Target stores and improving staffing. The company has more than 100 full-scale remodels underway, with a goal of reaching 130 this year, Fiddelke said Tuesday.

During the second quarter, comparable store sales — sales from established physical stores — increased 2.7%, while increased same-day deliveries pushed digital comparable sales up 8.7%.

Target is one of the first big retailers to report second-quarter financial results, which could give industry analysts and economists another read on whether ongoing price pressures from the conflict in Iran impacted consumer behavior.

The Commerce Department released a report Friday showing weak retail sales in July. The University of Michigan’s consumer sentiment index, also released Friday, showed greater pessimism about the economy this month, likely driven by stubbornly high prices.

Target’s overall sales increased in all six of its main merchandising categories, led by double-digit growth in what the company calls Fun 101 — a division that includes consumer electronics, toys, trading cards, sports paraphernalia, books and gaming items.

Target’s beauty and food and beverage sales were also standouts. Target plans to roll out a new Target Beauty Studio concept next month in more than 600 locations. The new area, which will offer upscale beauty products and enhanced product expertise from staff, will partly replace its in-store shops with Ulta, which ended its partnership with Target this month, the company said.

Target executives said the company still was working to improve the assortment in its clothing and home goods departments, where sales hardly grew during the latest quarter.

Net income was $1.87 billion, or $4.11 per share, for the three months ended Aug. 1, easily beating the $2.34 per share that Wall Street had expected, according to a survey by FactSet. It also outpaced last year’s $935 million, or $2.05 per share. Yet this year also included millions from tariff refunds, which amounted to $1.65 in earnings per share, Target said.

Net sales rose 5.3% to $26.54 billion for the period.

Target now expects sales to increase 5%, up from its earlier predictions for a 4% gain. It also expects earnings per share for the full year to be in the range of $9.90 to $10.90. Analysts expect $8.52 per share for the year, according to FactSet.

In May, Target reiterated its guidance from March for earnings per share to be near the high end of $7.50 to $8.50.