Target Corporation (NYSE:TGT)’s food and beverage sales grew 7% in the quarter ended August 1, 2026, its fastest growth in that business in three years. Reuters reported on August 20, 2026, that the retailer still holds only about 5% of the US grocery market compared with Walmart Inc. (NASDAQ:WMT)’s 27%.
Why This Matters
Grocery brings shoppers into stores more often than almost any other purchase, making it a critical traffic driver. However, the food carries lower margins than apparel and home goods.
Can Target turn grocery trips into bigger spending elsewhere in the store, or is it just building a snack business that never expands into real market share?
Target’s Grocery Surge: Traffic Driver or Temporary Boost?
Food and beverage sales grew 7% this quarter, the fastest pace in three years, and that growth directly pulled shoppers into stores: traffic rose 3.6% while snack sales grew 15%. Grocery trips happen more often than clothing trips, so every extra visit gives Target Corporation (NYSE:TGT) more chances to sell higher-margin items in the same basket. Target plans roughly 600 new private-label food products over two years, expected to add more than $2 billion in growth, on top of comparable sales up 3.8%. A nearly $1 billion tariff refund gave Target room to lean into lower prices without hurting margins, and the company raised its annual sales forecast to about 5% from 4%.
Grocery still makes up less than a quarter of Target’s merchandise sales, and its food business remains roughly 12 times smaller than Walmart Inc. (NASDAQ:WMT)’s. Hence, fast growth off that small base moves the needle only a little. Being priced about 5% higher than Walmart on identical items, with an even wider gap in snacks, works against Target once shoppers compare carts. Gross margin expanded to 33.7%. But that came while Kroger’s new CEO, a former Walmart executive, pledged the chain’s biggest price cuts in years and Costco cut egg and beef prices. It means Target Corporation (NYSE:TGT) is winning on curation while rivals compete harder on price. Home furnishings and apparel stayed roughly flat, showing grocery traffic isn’t reliably spreading into the rest of the store.
Grocery Clash: Walmart’s Unmatched Scale Meets Target’s Curation Play
Walmart Inc. (NASDAQ:WMT)’s grocery business makes up 59% of its merchandise sales and commands about 27% of the US grocery market, more than five times Target’s share. That scale lets Walmart cut prices across a far wider selection than Target can match. Its dominant footprint keeps drawing the recurring trips that build lasting habits.
Target’s renewed focus on trendy, exclusive grocery items targets younger, brand-conscious shoppers Walmart has struggled to capture through pure value positioning. Every dollar of Target grocery growth is a dollar Walmart Inc. (NASDAQ:WMT) didn’t get. If those traffic gains keep converting into broader spending, Walmart’s scale protects its core business but doesn’t fully stop real share erosion at the margins.
Insider Monkey’s Hedge Fund Data
Target Corporation (NYSE:TGT) was held by 68 hedge funds as of Q1 2026, up from 58. Walmart Inc. (NASDAQ:WMT) was held by 99, down from 114. For comparison, Costco was held by 107 hedge funds and Kroger by 52.
Conclusion
Target’s grocery turnaround is real and measurable. However, matching Walmart’s scale was never the plan. The real test is whether snack aisle traffic ever spills into the rest of the store.
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Disclosure: None. This article is originally published at Insider Monkey.
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