With Toys R Us closing its doors, a number of retailers have added toys or expanded that section in their stores. Target (NYSE:TGT) has been a big player in this space, increasing selection and adding space to their toy departments.

That should give the company the ability to increase its sales-per-customer this holiday season. Going forward, Target may be able to hold onto some of these shoppers and perhaps become known as the toy store instead of just one that has them on the shelves.

A full transcript follows the video.

This video was recorded on Oct. 9, 2018.

Vincent Shen: With this step-back look, I will say something else. I wanted your thoughts on this, Dan. We talked about the strong comps growth in this quarter. Best in a decade or more. The company said that that strength was across all five of their major product categories. I thought it was interesting that they note that toys were called out specifically by management, in terms of being a category of strength for the company. This seems like a boost because of the Toys R Us closures. What do you think going forward? Toys and baby products were mentioned by management as being lower margin but high-growth areas where they're pushing for the holiday season. Thoughts there?

Dan Kline: We've talked a lot about toys, because obviously, I have a background running a toy store. Target, just like everybody else, they don't do much with toys. They just throw them on the shelves. That said, the Target toy shelves are very well-organized. If you walk into the Lego area, it's very clean. There's some interactive displays, there's some put-together items. The same thing for its baby toys, its different items. You can get a little bit hands-on. So, I do think it's more pleasant to shop toys in a Target than, say, a Walmart. And they have grown their selection. They've added either seasonal toy areas, or in some cases, just expanded their toy area in general. Because, obviously, there's an opportunity.

I'd love to see them do a little bit more, demonstrate some of these toys, have some working sections where you can play with things. But, for what it is and for what they do, they've seen the opportunity and they've really grown what they have, moved into some new categories, tweaked the edges with some more educational stuff, with some things that are a mix between athletic and toy. So, I see a huge opportunity this holiday season.

Going forward, toys are a bit of a commodity, so it's hard to tell. But they're absolutely capitalizing on what's there right now.

Shen: A couple of more minutes here before we wrap up. Something that I also want to say to put these really strong recent results in perspective, as impressive as the second quarter was, on a more macro level, retail spending across the board has been very strong recently. Even Cornell, the CEO, he said, "There's no doubt that, like others, we're currently benefiting from a very strong consumer environment, perhaps the strongest I've seen in my career." To that effect, shares of Nordstrom, Kohl's, Macy's and TJX Companies are also all up 30% or more year to date. They're also among the top performers in the S&P 500 so far this year. Target's not alone, in terms of this brick and mortar retailer being part of that tailwind.

To wrap up, Dan, anything else you'd like to add before we close out?

Kline: Target has positioned itself well for the next downturn. By having a lot of inexpensive house brands that don't feel cheap, I think they've captured the old magic. Target was not a thing in the northeast where I grew up until maybe 15 years ago. When I first walked into one, I instantly knew, this is nicer than what we used to have. This is better than the supermarket. It's better than Walmart. It's better than the old Bradley's and Kaldor's sort of stores we used to have. That sort of slipped away over time. The days where you could make the joke, "I'm shopping at 'Targét'," which became a cliché, but it actually did mean something. It was a superior brand experience. I think now, they've cleaned up some of those edges. Even simple things like having good packaging put some of that pride back. It's not all about price. It's a bit about price and lifestyle. Yeah, I'm being sensible, but I'm not buying something cheap. And I think that's very important.

Shen: I also think it's important for listeners to realize that in the first half of this year, on the more financial side, Target generated $2.7 billion of operating cash flow. The company has quite a bit of wiggle room in making all these investments that we've talked about. They forecasted $3.5 billion of capex spending in 2018. A lot of their brick and mortar competition really cannot afford to make these long-term plays as they're just struggling to keep the doors open. But here, Target can do all that while easily maintaining their 3% yield, which has grown 47 years straight at this point. The stock is actually just shy of becoming a dividend king.

Definitely interesting to watch. I think the management team here has executed really well. Thanks for bringing it onto my radar, Dan!

Daniel B. Kline has no position in any of the stocks mentioned. Vincent Shen has no position in any of the stocks mentioned. The Motley Fool recommends Nordstrom and The TJX Companies. The Motley Fool has a disclosure policy.