Target executives told investors and reporters the company was punished for its Pride Month collection, hitting both sales and share prices, but it will not give up its annual celebration of alternative lifestyles.
In the call, Target CEO Brian Cornell acknowledged the Pride Month retail carnage and that second-quarter results were below his expectations.
“Comparable sales decreased 5.4 percent within the quarter. Comp trends softened from the second half of May into June–before we saw meaningful recovery in both traffic and comps in July,” he said. Foot traffic fell 4.8 percent, and online sales fell 10.5 percent.
The CEO said revenues for Q2 were $24.8 billion, 4.9 percent lower than Q2 2022, reflecting a total sales decline of 4.9 percent.
The company generated non-sales revenues that offset its first quarterly sales decrease in six years, and the company improved margins so that its income for the second quarter was $1.2 billion, 273 percent higher than last year, he said.
Target CEO: Pride Collection hurt sales, created turmoil with guests
The company launched its Pride Collection in May, as it has for the last decade, but this year it came on the heels of actor Dylan Mulvaney’s videos promoting Bud Light dressed as a woman. Americans were already in a foul mood from Mulvaney’s antics, so when Target put its collection—and its tuck-friendly swimwear front in center in the stores—Americans responded with revulsion.
May 1, Target’s stock closed at $157, already down from its 52-week high of $181 in February. June 12, the stock bounced off $125, where it closed Aug. 15, the day before the earnings release.
Eventually, Target pulled the tuck-friendly bikini bottoms off the racks, but when the blowback began its build, Target’s PR team’s strategy was to defend the trans-targeted items and point out they were only sold in adult sizes.
Cornell said the guests’ reaction to the collection was so visceral and profoundly negative that the team members felt threatened.
“Many of our sort team members face a negative guest reaction to our pride assortment,” he said.
“Members of our team began experiencing threats and aggressive actions that affected their sense of safety and wellbeing,” the CEO said.
“I wanna make it clear, we renounce violence and hate of all kinds, and the state to our team and our guests is our top priority,” he said.
“To protect the team in the face of these threatening circumstances, we quickly made changes including removable items through the center of the most significant confrontational behavior,” he said.
Cornell said Target is not backing down from celebrating Pride Month, but the retailer will tamp the brakes in future presentations.
He did not mention that at least one of the threats made against the chain came from a pro-LGBTQ activist angry that the company removed some of the trans-specific items.
“As we navigate an ever-changing operating and social environment, we’re committed to staying close to our guests and their expectations of targets specific to Pride and heritage months,” he said.
“We’re focused on building assortments that are celebratory and joyous with wide-ranging relevance, being mindful of timing, placement, and presentation, meaning the segmentation and leveraging our digital experience and reconsidering the mix of own brands, national brands, and external partners,” he said.
Target CEO said in May DEI programming ‘helping us drive sales’
Cornell’s remarks on the call were a climbdown from his embrace of Pride Month and Diversity, Equity and Inclusion programming three months ago. The CEO joined the May 17 episode of the Fortune Leadership Next podcast full of enthusiasm for what turned out to be retail poison.
“That’s part of why we’ve seen explosive top-line growth, so I think the facts are in, the results for us, and the things we’ve done from a DE&I standpoint,” he said.
“It’s adding value, it’s helping us drive sales, it’s building greater engagement with both our teams and our guests, and those are just the right things for our business today,” he said.
Cornell said DEI had been part of the culture shift he brought with him when he took over the retail giant in 2014.
“I know that focus on diversity and inclusion and equity has fueled much of our growth over the last nine years,” he said. “When you walk into a store, and you feel at home, and it represents the community, it makes a huge difference.”
CEO: Stores, team members hit with ‘unsustainable’ levels of shoplifting, violence
Cornell finished his overview with investors and reporters with his insights into how the company and its employees suffer at the hands of theft, also called “shrink,” and violence.
“Our team continues to face an unacceptable amount of retail theft in organized retail crime,” he said.
“Shrink in the second quarter remained consistent with our expectations but well above the sustainable level where we expect to operate over time,” he said.
In his Q1 conference call, the CEO said Target lost $800 million to shrinkage in 2022 and hoped to cut it to $500 million in 2023.
Cornell said this organized shrink wave is coupled with a more than doubling of the attacks on Target team members.
“Unfortunately, safety incidents associated with theft are moving in the wrong direction,” he said.
“During the first five months of this year, our store saw a 120 percent increase in theft incidents involving violence or threats of violence.”