Target posted a notable acceleration in its grocery business in the quarter ended Aug. 1, with food and beverage sales rising 7% compared with the year-earlier period. Management and some investors view the performance as evidence that the company’s renewed emphasis on groceries is beginning to gain traction, but the broader recovery will hinge on whether shoppers who come in for staples and snacks also buy more apparel, home goods and other higher-margin merchandise.
New Chief Executive Michael Fiddelke has prioritized making grocery a larger draw for guests, and the company has redesigned sizable portions of its grocery department to spotlight faster-growing segments. Executives have placed greater emphasis on protein-focused snacks, such as Misfits bars and Khloud chips, and reconfigured aisles and displays to encourage browsing and impulse purchases.
"It’s mission-critical," said Sarah Henry, managing director at Target shareholder Logan Capital Management, describing grocery as a traffic driver because it brings shoppers into stores more frequently than many discretionary categories. Investors and analysts alike note that food typically yields lower margins than apparel, home furnishings and other discretionary lines, which means the grocery play must ultimately generate incremental spend across the rest of the store for the turnaround to be durable.
Target still derives less than one-quarter of its merchandise sales from groceries, a share well below Walmart’s 59%. Market data cited in the company’s reporting show Target accounted for roughly 5% of the U.S. grocery market at the end of 2025, whereas Walmart held about 27%.
Analysts stress that scale parity with large supermarket players is not the explicit objective. "The right measure of success is whether Target’s food business grows faster than the category and pulls incremental visits," said Jacob Aiken-Phillips, consumer research director at Melius Research. He added that the strategy only pays off if grocery trips carry into the rest of the store.
Private-label expansion and merchandising changes
As part of its grocery strategy, Target plans to introduce about 600 new private-label food and beverage items over the next two years, including roughly 400 products under its Good & Gather banner. A company spokesperson indicated the program is expected to drive more than $2 billion in growth over the next few years.
Chief Merchandising Officer Cara Sylvester framed the effort as an attempt to change how guests view food at Target. "Make food a destination, not simply a category guests shop while they're in our stores," she told analysts after the retailer reported its quarterly results.
Signs of early momentum
Some metrics point to early progress. Store traffic rose 3.6% in the latest quarter, and snacks, one of Target’s stronger food categories, expanded about 15% year over year. Growth in membership and advertising revenue, together with nearly $1 billion in tariff refunds in the period, provided Target room to compete on price for certain grocery items, Logan Capital’s Henry said.
However, the retail calendar ahead will be revealing. Henry noted the real test for whether grocery-driven trips broaden into more profitable purchases will come in the back-to-school and holiday seasons in the second half of the year.
Performance in other categories and near-term outlook
Target’s results outside grocery were mixed. The retailer saw a 10.6% jump in its hardlines business under the Fun 101 banner, while beauty sales rose roughly 7%. By contrast, home furnishings and apparel, two important discretionary categories, were essentially flat in the quarter.
Mari Shor, a senior equities analyst at Target stockholder Columbia Threadneedle, expects the changes aimed at home and apparel to begin resonating in the second half of the year and beyond. That said, some analysts warn that merchandising overhauls can produce an initial bump that later moderates.
"When a retailer renovates a store or improves its assortment and merchandising, it can lead to an immediate improvement in customer traffic and sales" that often moderates after two or three quarters, said Georgy Vashchenko of Freedom Global. He also said Target’s grocery changes have "materially improved the customer experience," a perception increasingly reflected among investors who see early evidence of Fiddelke’s turnaround initiatives taking hold.
For Target, the strategic challenge is clear: convert more frequent grocery visits into fuller, higher-margin baskets. Management has made tangible moves to enhance the food offer and presentation, and early indicators show improved traffic and category growth. The durability of those gains will depend on execution through the critical second half of the year and whether other discretionary categories regain momentum.