Target’s Market Cap Plummets Over $15.7 Billion Amidst LGBTQ+ Pride Merchandise Backlash

Retail giant Target has experienced a significant decline in its market capitalization, losing over $15.7 billion as backlash continues to mount over the company’s decisions regarding LGBTQ Pride merchandise. On Monday, Target’s stock dropped an additional 0.4%, further contributing to its downward spiral.

Prior to the controversy surrounding its Pride displays, Target boasted a market value of over $74 billion, as tracked by Dow Jones Market Data Group. However, the retailer’s decision to feature Pride-themed items, including children’s apparel and “tuck-friendly” women’s swimsuits, initially drew criticism from conservative groups. To the dismay of some in the LGBTQ community, Target then scaled back the displays ahead of Pride Month, which led to further outrage.

The stock price closed at $126.48 on Monday, marking a sharp decline from its recent peak of $161 just last month. Three Wall Street firms have downgraded Target’s shares due to concerns over slowing sales. The stock is currently approaching its 52-week low of $125.08.

Citi analyst Paul Lejuez downgraded Target’s stock from buy to neutral last Friday and positioned the troubled retailer against its rival Walmart. Lejuez predicted that Walmart would seize a larger market share. “We believe Walmart is likely to continue gaining market share, and Target’s high exposure to discretionary sales will not serve them well in the current macro backdrop,” he stated in a note.

Lejuez added, “Despite the recent stock pressure, we cannot recommend investors buy the stock given these dynamics and now believe the risk-reward is more balanced, but the risk is more to the downside near term.”

In addition to the Pride controversy, Lejuez highlighted a 13.9% drop in store traffic at Target during the final week of May, coinciding with the national news coverage of the Pride-related backlash. This decline occurred as inflationary pressures dampened consumer spending over the Memorial Day weekend. Last week, KeyBanc Capital Markets also downgraded Target’s shares from “overweight” to “sector weight,” citing the resumption of student loan payments mandated by Congress’ debt ceiling agreement as a substantial obstacle to discretionary spending. Target, with its elevated discretionary sales mix and a younger, college-educated consumer demographic, is expected to face challenges in this regard.

Earlier this month, JPMorgan Chase downgraded Target’s stock as well, with analysts expressing concerns about a potential decline in sales as consumers curtail spending amidst persistent inflation.

Target confirmed that it was making “adjustments” to its Pride merchandising plans in May after it received backlash. According to reports, some southern stores were instructed by the corporation to move LGBTQ Pride merchandise away from the front of their locations due to customer outrage, with the aim of avoiding further controversy.

The company has maintained that the decision to dial back the Pride displays was driven by the desire to protect its employees from threats made by angry customers. However, the repercussions of these decisions have had a significant impact on Target’s market performance and have prompted analysts to reassess the company’s outlook in the face of ongoing challenges.