Target’s pivot toward food and beverage is paying off, with thousands of new SKUs that prioritize protein, functional beverages and better-for-you snacks attracting shoppers back to the retailer.
The company reported in its Q1 earnings report that first-quarter net sales growth reached 6.7% year over year, beating expectations for the mass merchandiser following several underwhelming consecutive quarters.
The company said the Q1 success was partly driven by Target’s food-forward strategy that included launching more than 3,000 products in the first quarter alone.
The retail giant beat consensus earnings estimates substantially, reporting $1.71 per share on revenue of $24.44, compared to Wall Street estimates of $1.41 per share on revenue of $24.28, according to Earnings Whispers.
The positive returns prompted the company to adjust its estimated annual earnings to the high end of the $7.50 to $8.50 per share range. Target also upgraded its annual revenue expectation to $108.97 billion, from $106.88 billion cited in the previous quarter.
Despite the good news for the quarter, Target CEO Michael Fiddelke said the company’s “work is just beginning as we are lapping softer results in Q1 of 2025.”
“First quarter financial results were stronger than expected, providing encouraging early signs that our clarified strategy is resonating with our guests and driving broad-based growth across our business,” Fiddelke said. “While we’re pleased with our Q1 performance, our focus remains on building consistent, long-term growth, and we recognize there is much more work in front of us.”
Food and beverage, along with beauty and Fun101 (toys, books, tech, music and other entertainment-related categories), experienced mid-single-digit compound growth for the quarter on a two-year basis, he noted.
Food and beverage growth
The food and beverage growth is likely due in part to the rapid expansion of the category in the first quarter.
Target’s release of more than 3,000 new food products in Q1 aims to transform the store into a grocery-first destination for some shoppers, according to Cara Sylvester, Target’s chief merchandising officer. The approach is “evolving food from a category they shop while they’re at Target into a reason they choose to come to Target,” Sylvester said.
Sylvester said the “food forward strategy” has seen sales of its new lineup of food and beverage SKUs grow 50% over the prior assortment. Those products focus on consumer trends such as protein, functional beverages and better-for-you snacking, Sylvester said.
Target plans to continue leaning in on those trends, according to Sylvester, who added that the mass merchandise retailer also plans more collaborations and Target exclusives over the course of the year.
It will be the company’s “largest transition in over a decade,” in food, which will reset nearly half of Target’s center-store grocery assortment and eliminate all synthetic coloring from the retailer’s cereal assortment, Sylvester said.
Health and wellness is key
Health and wellness products are increasingly prioritized by shoppers, with more than 70% of customers searching for products in the category, Sylvester said.
Roughly half of the new items released in Q1 fall within the category, she added.
“To deliver newness and drive greater distinction in the market, we recently added around 1,500 new items and have plans to refresh around 40% of our assortment this year,” she said. “These changes drove double-digit sales growth in the first quarter, doubling comp growth rates in wellness-related categories compared with Q4 of last year. In food, guests tell us they’re looking for inspiration, new products, trending flavors and better-for-you options.”
Target’s Baby Concierge program
Sylvester also touted Target’s Baby Concierge program, which is being tested in roughly 200 Target locations.
The Baby and Kids category experienced more than a 5 percentage point acceleration in comparable sales trends, due to premium services and in-store experiences, Target noted in the report.
“We know the value we can deliver by helping busy new parents find the products they want and need to keep their baby happy, healthy and safe,” Sylvester said. “So we’re investing to do just that with a thoughtfully curated assortment of trusted owned and national brand products, an elevated in-store experience and in select stores, new premium services we’re testing, including a Baby Concierge.”
The increase in baby comp trends at the back half of the quarter, following the launch of the new products and services “shows that when we reduce friction and build trust early in a family’s journey, we foster an ongoing relationship that spans across categories.”
