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Target’s quarterly sales fell for the first time in six years as consumers
pulled back on discretionary goods and fierce right-wing backlash to Target’s
Pride Month collection took a toll on the brand.

Target’s sales at stores open for at least one year dropped 5.4% last quarter,
including a 10.5% drop online. The company also cut its annual sales forecast.



Target’s foot traffic dropped 4.8% last quarter, “likely a function of a mix
that skews too discretionary, as well as the Pride merchandise issues,” Michael
Baker, an analyst at DA Davidson, said in a note to clients.

Still, Target’s profit came in higher than Wall Street’s expectations, and the
stock rose 5% during early trading Wednesday. Heading into Wednesday, Target’s
stock dropped 27% over the past year.

Target was one of the strongest-performing retailers during the pandemic as
consumers flocked to stores and its website while stuck at home. But Target has
slipped as consumers change their spending patterns.

Americans are spending more on experiences, including concerts and movies, and
less on nonessential items. Home Depot (HD) said Tuesday that consumers took on
fewer major home renovation projects.

Target (TGT) is over-exposed to non-essential merchandise compared to
competitors such as Walmart (WMT) and Costco (COST). More than half of Target
(TGT)’s merchandise is discretionary – clothing, home decor, electronics, toys,
party supplies and other non-essentials. The company in recent years has added
more food and essentials to its stores.

“Consumers are choosing to increase spending on services like leisure, travel,
entertainment and food away from home, putting near-term pressure on
discretionary products,” CEO Brian Cornell said on a call with analysts
Wednesday.

Cornell said that store theft and safety have also become bigger concerns.



“Safety incidents associated with [theft] are moving in the wrong direction,”
Cornell said. “During the first 5 months of this year, our stores saw a 120%
increase in theft incidents involving violence or threats of violence.”




PRIDE MONTH BACKLASH

Target has been embroiled in the political culture wars over gender and sexual
orientation.



Beginning in May, Target also faced a homophobic campaign that went viral on
social media over its annual Pride Month clothing collection. Fueled by
far-right personalities, the anti-LGBTQ campaign spread misleading information
about the Pride Month products.

The campaign became hostile, with violent threats levied against Target
employees and instances of damaged products and displays in stores. Target said
on May 24 that it was removing certain items that caused the most “volatile”
reaction from opponents to protect its workers’ safety.

But Target’s response frustrated supporters of gay and transgender rights, who
said the company caved to bigoted pressure.

“The strong reaction to this year’s Pride assortment” impacted sales during the
quarter, Christina Hennington, Target’s chief growth officer, said Wednesday.

Target will adjust its Pride Month collection next year, including potential
changes to timing, placement in stores and the mix of brands it sells.

“The reaction is a signal for us to pause, adapt and learn,” she said.

Other brands, such as Bud Light, have faced right-wing backlash over attempts to
be more inclusive.

America’s former top-selling beer has targeted by right-wing media and
anti-trans commentators since April, after sponsoring transgender influencer
Dylan Mulvaney.

The controversy cost Bud Light’s parent company about $395 million in lost US
sales and Bud Light lost its top beer spot to Modelo.

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Sales at Target fell for the first time in six years, according to an earnings
report released on Wednesday (Aug. 16), following calls to boycott the retailer
over a Pride Month marketing campaign. Still, the company’s profit margin beat
Wall Street’s expectations, leading its stock to jump by as much as 6% following
the news.



During a call with reporters, CEO Brian Cornell partially blamed declining sales
on controversy over the company’s apparent support for the LGBTQ movement,
promising that the company would change its Pride Month operations in 2024.

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“As we navigate an ever-changing operating and social environment, we are
applying what we learned,” Cornell said, saying sales were up in July after
falling precipitously in June.

On the same call, Target’s chief growth officer Christina Hennington added that,
going forward, the company would be more cautious with how it markets heritage
month celebrations, including a reconsideration of what brands it sells.

Additionally, executives blamed underwhelming numbers on an unfavorable
macro-environment for retailers. They cited stubbornly high food costs—caused by
inflationary pressure—for leading consumers away from discretionary purchases
like clothing and electronics. And the company cut its annual expectations
accordingly, slashing full-year sales and profit expectations.


TARGET’S EARNINGS, BY THE DIGITS

$24.8 billion: Quarterly revenue, missing expectations by more than $400
million.

54%: Percent of annual Target sales from toys and electronics. Only 20% of
Target’s sales are from groceries, making it more vulnerable to economic trends
than competitors like Walmart, which gets 59% of its sales from groceries.

-28.5%: Percent drop in Target stock in the last year, including a sharp dip
following the Pride Month controversy.





HOW PRIDE MONTH SUNK TARGET’S STOCK

datawrapper-chart-mJaLx




TARGET PROVES CORPORATE ADVOCACY IS JUST ABOUT THE BOTTOM LINE

It didn’t take long for Cornell to waffle after conservative protests began (and
sales began to decline) in May. Just weeks after launching this year’s Pride
Month campaign, Target pulled a number of products aimed at the LGBTQ community
like a “tuck friendly” swimsuit meant for transgender women, as well as a range
of designs by transgender designer Erik Carnell.

But, the retailer didn’t abandon the marketing campaign completely, with Target
choosing to stock some of its rainbow-themed products through the end of Pride
Month in June. Now, during the earnings call, Cornell further distanced his
brand from LGBTQ marketing, without abandoning it completely.

This attempt to have it both ways leaves Target in an precarious situation. The
company continues to alienate LGBTQ supporters—the vast majority of the
country—while still drawing the ire of conservative activists.

The situation echoes Bud Light’s recent predicament. After right-wing backlash
to a LGBTQ marketing campaign this spring, Anheuser-Busch attempted
damage-control by dumping a trans influencer and releasing an ad about the
American heartland. The result? Bud Light is no longer the most popular beer in
America after it faced backlash from conservatives and the LGBTQ community
alike.

Like with Bud Light, Target’s decision to disavow its veneer of LGBTQ advocacy
reveals the company’s true priorities—the bottom line—which in turn might end up
leading to less business from all sides.


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🌈 More than a dozen state attorneys general are giving Target reasons to
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🛍️ Target can’t keep up with its customers’ changing shopping habits

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