This one should be easy! Tell the interviewer that you are a trustworthy, honest worker with a great track-record.
"I can't imagine ever stealing, especially from my workplace! I know that being a member of a team means being trustworthy and honest, and I would never take advantage of my coworkers by taking merchandise that doesn't belong to me. I'm excited about working at Target and would never do something to jeopardize my job!"
Second Answer Example
"At a previous job, I actually witnessed a coworker trying to steal merchandise from the store. It made me so upset, and I knew the right thing to do was to immediately tell my manager what I had seen."