By Nandita Bose

MINNEAPOLIS (Reuters) - Target Corp <TGT.N> Chief Executive Brian Cornell on Thursday urged the company's employees to focus on delivering a better in-store and online experience for shoppers in an attempt to turn around its performance before the crucial holiday season.

Target has had a lackluster first half and warned of flat or a slight decrease in same-store sales for the second half of 2016, as shoppers turn to the internet and spend on big-ticket items like cars and home renovations, rather than small, discretionary purchases that make up the bulk of Target's offerings.

"Competition has been fierce and we have had a few bumps on the road this year," Cornell told thousands of store employees gathered at an annual meeting near its headquarters in Minneapolis. "We have 137 days to turn this into a winning year."

He asked employees to deliver a strong marketing program, make sure stores were sufficiently stocked and asked them to make better decisions when it came to operating stores.

Last month, Target's second quarter traffic and sales at stores open at least a year fell more than expected, and the retailer said it expects comparable store sales to either stay flat or fall by as much as 2 percent in the second half of 2016.

"(Comparable sales) are flat year-to-date. I'm disappointed with that... we own that," Cornell told reporters at a session held before the meeting.

Target's performance has suffered since the first quarter of this fiscal year.

The first half performance led Cowen & Co analysts to recently downgrade the stock. In a note, the brokerage said the "weakness that began in the first quarter coupled with the significant traffic decline seen in the second quarter demonstrate to us that Target is losing share to the likes of Amazon <AMZN.O> and Wal-Mart Stores Inc <WMT.N>."

Cornell expects changes to help drive a sales rebound and also boost groceries sales, which count for a fifth of its $74 billion annual revenue.

Target has been reorganizing its grocery business, adding more fresh produce as well as organic and gluten-free items, while also testing new displays. It plans to focus more advertising on such items in its weekly circulars and promotions, Cornell said.

Target will also focus on rolling out more smaller-format stores and expects meaningful sales from that starting next year. The retailer runs 23 smaller-format stores, which it categorizes as less than 50,000 square feet, and plans to open nine more this year and at least 16 in 2017.

(Reporting by Nandita Bose in Chicago; Editing by Bernard Orr)