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Target made changes to its LGBTQ+ merchandise ahead of the month of Pride after backlash from some customers.
Seth Wenig/AP Photo
Shares of
Target
were about to end the week at their lowest levels in nearly three years. The seven-day sale is partly about revenue and partly about the decision to adjust its LGBTQ+ Pride Month collection.
Target shares (ticker: TGT) have been falling since last week, dragged down by the company’s mixed first-quarter results. Although Target beat its earnings, it warned that sales would slow going forward as shoppers cut discretionary spending.
Then, on Wednesday, Target announced it would change or remove certain products from its annual Pride collection in response to intense backlash from some customers.
“Since introducing this year’s collection, we have faced threats affecting our team members’ sense of safety and well-being at work,” the company said.
The decision to pull commodities could be what pushed the stock lower even further this week, wrote Evercore ISI analyst Greg Melich. Shares were down 1.24% to $139.06 on Friday, on track for their lowest close since August 2020. Since the company’s announcement on Wednesday, the stock is down 2 .7%, underperforming the
S&P500
the gain of 2.1%.
The target stock has closed in the red for seven straight days, losing nearly 14% over that period, according to Dow Jones Market Data. It is the longest losing streak for Target shares since Nov. 20, 2018, when it fell for eight consecutive trading days. The target was a Barrons choice of securities in 2022.
Evercore’s Melich says he doesn’t believe the damage to Target from its decision to sell Pride Month products and then pull some of them will be as heavy on stocks as
Anheuser-Busch InBev
(BUD) recently experienced after a social media promotion for Bud Light featuring transgender influencer Dylan Mulvaney sparked boycotts.
“We believe Target will pull through,” Melich wrote in a note Friday. “And while the situation remains fluid, we believe the risk is lower than what AB InBev saw with the recent Bud Light fiasco.”
Melich sees several reasons for this. For one thing, controversy surrounds a fraction of the seasonal items, about 2,000 out of more than 80,000 stocking units, or SKUs, that the store typically carries. The company also has a long history of selling Pride month merchandise, Melich added, which means management will likely be able to transition to the right product assortment and marketing over time.
However, less risk does not mean no risk. Target has gained market share during the pandemic and it needs to tread carefully to avoid losing those gains, Melich wrote.
“It’s hard to get traffic/sales growth if a significant portion of your customer base decides not to return, while the potential uplift in sales from customers who agree with you probably won’t fully offset those who don’t. ,” he wrote.
Write to Sabrina Escobar at sabrina.escobar@barrons.com
