Target's grocery bet is paying off. Now it must get shoppers beyond the snack aisle

• Traffic rose 3.6% in the latest quarter with snack sales jumping 15%, but Target holds only 5% of the U.S. grocery market compared to Walmart's 27%
• Target plans to add 600 private-label food products over two years (including 400 under Good & Gather brand), expecting to drive over $2 billion in growth
• While hardlines grew 10.6% and beauty rose 7%, key categories like home furnishings and apparel remained roughly flat, creating uncertainty about whether grocery traffic will translate to broader store purchases

Target's Grocery Expansion Shows Promise, But Challenges Remain

Target's strategic pivot to groceries is delivering results, with food and beverage sales growing 7% in the quarter ended August 1—the fastest growth in three years. However, the company faces a critical challenge: converting grocery shoppers into buyers of higher-margin merchandise.

Key Performance Metrics

• Traffic increase: 3.6% in latest quarter
• Snack sales growth: 15%
• Planned new products: 600 private-label food and beverage items over next two years, including 400 under the Good & Gather banner
• Projected growth: Over $2 billion in coming years
• Current grocery market share: 5% vs. Walmart's 27%

Strategic Context

Groceries represent less than 25% of Target's merchandise sales, compared to 59% at Walmart. The company has redesigned grocery departments to emphasize high-growth categories like protein snacks (Misfits bars, Khloud chips) and encourage impulse purchases. New CEO Michael Fiddelke aims to make food "a destination, not simply a category."

Performance Across Categories

While beauty sales rose approximately 7% and hardlines jumped 10.6%, home furnishings and apparel remained roughly flat—a concern since these categories carry higher margins than groceries. The company received nearly $1 billion in tariff refunds and saw growth in membership and advertising revenue.

Market Outlook

Analysts emphasize the strategy only succeeds if grocery traffic drives purchases across the store. The second half of 2025, including back-to-school and holiday seasons, will be the crucial test. Some experts caution that merchandising overhauls often produce temporary lifts lasting 2-3 quarters, though Target's improvements appear to have "materially improved the customer experience."