By Savyata Mishra

Aug 22 (Reuters) - Target's ( TGT ) price cuts on

groceries are finally paying off.

The Minneapolis-based company has returned to comparable

sales growth after several sluggish quarters as shoppers who

visited the big box retailer's stores for its discounted food

and daily household items ended up browsing through other aisles

as well.

"Yes, (customers are) budget conscious. And yes, they're

hunting for deals and everyday value. But they're also willing

to shop when they find that right combination of fashion and

newness at the right price," Target ( TGT ) Chief Operating Officer Rick

Gomez told analysts on a post-earnings call on Wednesday.

Target's ( TGT ) sales in the grocery aisles have typically made up

a much smaller part of its sales mix than rival Walmart's ( WMT )

, with apparel, electronics and home goods taking up more

shelf space - a combination that has hurt sales over the last

two years as inflation-weary consumers reined in discretionary

spending.

In an attempt to win over more price-sensitive shoppers,

Target ( TGT ) cut prices on over 5,000 popular items this year,

including on bread, soda, paper towels, and pet food. It also

launched a private-label basics line called "dealworthy" with

nearly 400 items such as iPhone chargers and toiletries below

$10.

The strategy makes sense. Rivals including Walmart ( WMT ), Costco

and Amazon.com ( AMZN ) have all said shoppers are

hunting for bargains.

"It's sort of an age-old strategy: you don't make a profit

on the essentials, milk, eggs and bread, but you use low prices

on those essentials to get people into the store and then

hopefully they end up buying some of the higher-margin items,"

said Blake Droesch, an analyst with Emarketer.

Higher foot traffic was the best way to drive incremental

sales through impulse buying, he said.

Target ( TGT ) shares closed 11% higher on Wednesday, a sharp

contrast to three months ago, when the stock tumbled 8% after

the company posted disappointing first-quarter earnings.

Apparel sales also reversed from several quarters of

declines to rise 3% in the second quarter, led by demand for

Target's ( TGT ) private-label "All In Motion" and "Wild Fable" lines.

Beauty was another standout segment, with sales growing 9%.

The retailer has more than 45 private labels, which generate

more than $30 billion in sales each year. Target ( TGT ) has been

expanding its own brands after its "cheap chic" strategy of

offering trendy, affordable designer home goods and clothing

failed to bring in loyal customers.

On Wednesday, Target's ( TGT ) executives touted new launches of

toys including its own brand, Gigglescape, and demand for

Target ( TGT )-themed plush bullseye dogs and Target ( TGT )-branded

Fisher-Price Little People.

But Morningstar analyst Erin Lash said she was skeptical how

long the benefits would hold "given Target's ( TGT ) undifferentiated

product assortment and lack of a clear cost advantage relative

to other discount retailers."