In its first full quarter since rolling back its diversity, equity, and inclusion (DEI) efforts in January—a move that spurred consumer backlash including an ongoing boycott—Target announced that net sales fell 2.8% YoY and that, far from making it up over the next three quarters, it was projecting a “low single-digit decline in sales” for the year.
While CEO Brian Cornell has recently tried to address the DEI backlash, including meeting with civil rights leader the Reverend Al Sharpton and issuing a letter to employees many found underwhelming, he studiously avoids uttering the term itself.
Try, for example, to spot the DEI reference when, after saying inflation was a factor for sales declines during the earnings call, Cornell added, “We faced several additional headwinds this quarter, including five consecutive months of declining consumer confidence, uncertainty regarding the impact of potential tariffs, and the reaction to the updates we shared on belonging in January.”
If your decoder ring didn’t catch it, when Target rolled back its diversity efforts in January, and removed (archived version) the DEI page on its website, it replaced it with a page that doesn’t even mention “diversity” called “Belonging at the Bullseye.”
“Stumbles in execution”: Target had more to blame than its DEI backtracking for the disappointing quarter.
“The top-line results are poor and they reflect many of the stumbles in execution, particularly in stores,” Neil Saunders, managing director at GlobalData Retail, wrote in a LinkedIn post. “The DEI debacle has also had something of an impact, although it is not the only factor driving down these numbers.”
In another LinkedIn post a week before earnings, Saunders pointed to the “mess and clutter” he’d encountered on Target visits, store associates being “stretched too thinly,” and “non-customer centric decisions” including putting so much inventory in locked display cases.
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The post continued that Target’s executives “don’t own issues, they don’t speak honestly and openly, they try to mask problems, they come out with weird statements (customers thanking them for locking up products), and they’ve become way snippier and more defensive to journalists.”
One journalist with whom it might be a challenge for those execs to play nice is Brian Sozzi, executive editor of Yahoo Finance, who concluded that Target “badly whiffed on earnings” and “is giving itself black eyes.”
“Its results are likely to spark worry,” Sozzi continued, “that consumer protests of its January retreat on DEI policies, combined with Trump tariffs, have created a financial tornado destined to wallop the company.”
Joy division: While the headlines don’t necessarily portend a tornado, they do suggest Target might want to hold on to its hat:
- “Target’s problems are escalating” (CNN)
- “Target sales slump amid tariff war, DEI change backlash” (Fox Business)
- “Target shares fall after hit from tariffs and store boycotts.” (Financial Times)
- “Target badly misses on earnings, slashes guidance as it battles DEI backlash and reinvigorated Walmart” (Yahoo Finance)
- “Target’s sales are tumbling—and its DEI moves aren’t helping” (Business Insider)
Sad as the news may seem, Target executives used the word “joy” no fewer than six times on the call.
“We remain confident that our strategy will allow us to continue bringing joy to millions of American families, while importantly paving the way for long-term profitable growth,” said Cornell.
Chief Commercial Officer Rick Gomez was feeling it too as he predicted a windfall for Target when the Nintendo Switch 2 is released June 5.
“We’re one of the top retailers in the US for this launch, and can’t wait to bring joy to families with this highly anticipated release,” Gomez said.