I work close to this target. One definite plus is...they now have sushi. SUSHI!
*Whips out redcard*
There is only one way for Target to go with food IMO and that is expanding it. It does however, take more work than Hardlines/Softlines to maintain, and the first thing Target needs to realize is that a 2lb tray of raw Chicken =/= A mini dress from ready-to-wear.
Food(especially Fresh) will be the last product to be bought online, and you right it has the LEAST profitability, but it is easily the most reliable source of income. You could compare it to your own monthly food expenses, If you kept a monthly tally for your average food expenditure I am willing to bet, they would all end up fairly the same, the same goes with Food Sales...
Wegman's is about as close as you can get to being a #1 Chain in anything, not just groceries in this country, and they VASTLY expanded even during our recent recession, not only that but they have been voted a top 100 company (I think they are usually in the top 20) to work for the entire country, since the year 1625 (I made they up, but i think they are on like a 20 year run or something). This is from a company that does nothing but sell you products with small profit margins.
I would apply to work there, but once people work there they never leave, so you can really only apply for part-time, and move up from there.
After this Home Innovation madness, I do see some deeply radical changes coming to Food at Target, which IMO will be wayy more expensive than Home Innovation remodels.