Target Corporation (NYSE:TGT)’s grocery strategy is starting to show signs of working. Food and beverage sales rose 7% in the quarter ended August 1, marking the category’s fastest growth in three years. Store traffic also increased 3.6%, while snack sales jumped 15%.
Under CEO Michael Fiddelke, Target Corporation (NYSE:TGT) is trying to make grocery a stronger reason for customers to visit its stores. The company is expanding its private-label food lineup by about 600 products over the next two years, including 400 under its Good & Gather brand. Target expects these efforts to generate more than $2 billion in growth over the next few years.
The bigger opportunity is to use grocery as a traffic driver. Customers may come in for milk, snacks, or other essentials and then purchase higher-margin products such as beauty, apparel, and home goods.
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Bull Case
Target Corporation (NYSE:TGT)’s grocery growth could help the company rebuild customer traffic. Grocery is purchased more frequently than discretionary products, giving Target more chances to bring shoppers into its stores. The recent 3.6% increase in traffic suggests this strategy may already be having an impact.
The expansion of private-label products is another positive. Target can use brands such as Good & Gather to offer value while also creating products that are differentiated from those sold by competitors. If customers become loyal to these brands, grocery could become a more consistent source of sales.
There are also signs that the turnaround is extending beyond food. Target’s Fun 101 business grew 10.6%, while beauty sales increased about 7%. The company also reported a 3.8% increase in comparable sales for the quarter and raised its full-year sales forecast again.
If Target Corporation (NYSE:TGT) can combine stronger grocery traffic with a recovery in apparel and home goods, the company could see a much broader improvement in sales and profitability.
Bear Case
The main concern is that grocery is a relatively low-margin business. Strong food sales alone will not be enough to transform Target Corporation (NYSE:TGT)’s earnings. The strategy only works if customers who visit for groceries also spend on more profitable merchandise elsewhere in the store.
Target also remains much smaller than Walmart in grocery. Food accounts for less than a quarter of Target’s merchandise sales, compared with 59% for Walmart. Target had about 5% of the U.S. grocery market at the end of 2025, versus Walmart’s 27%.
There is also a risk that the recent improvement is partly a temporary boost from refreshed stores, new products, and better merchandising. Some analysts have warned that these changes can initially lift traffic and sales before the impact moderates after a few quarters. Target still has work to do in key discretionary categories. Apparel and home furnishings were roughly flat, so the company has yet to prove that stronger grocery traffic will consistently translate into broader spending.
Conclusion
Target Corporation (NYSE:TGT)’s grocery strategy is an encouraging part of its broader turnaround. Strong food and beverage growth, higher traffic and the planned expansion of private-label products show that the company is making progress in attracting shoppers.
The real test is whether Target can turn grocery visits into larger overall baskets. If customers buy food and then spend on beauty, apparel and home products, the strategy could support both sales growth and better margins. For now, the signs are positive, but Target still needs to prove that the grocery momentum is sustainable and can lift its weaker discretionary categories. The upcoming back-to-school and holiday periods should provide a clearer indication of whether Fiddelke’s turnaround is becoming a lasting recovery or simply an early bounce.
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Disclosure: None. This article is originally published at Insider Monkey.
