A notable fund manager suggests that Target’s Pride Month promotions aimed at children affected the company’s bottom line last quarter.
- On Wednesday, Smead Capital Management released its Smead Capital Management Value Fund’s Q2 2023 Investor Letter.
- The fund delivered a modest 3.18% return compared to the 8.74% gain of the S&P 500, which it blames on Warner Bros., Pfizer, and Target.
- Target’s market capitalization dipped by more than $15 billion in early June to a 52-week low amid an ongoing boycott from conservative customers.
- A controversy surrounding the marketing of Pride Month merchandise, including “tuck-friendly” swimsuits for small children and T-shirts saying “Satan Respects Pronouns.”
- Target responded to criticism by removing specific items from stock or moving them to the back of the store, particularly after some store locations reported death threats.
Why It’s Important
The current market wisdom is that Target took a severe hit in sales early in the summer that was commensurate with ongoing trends in the market. Decreasing consumer spending on expensive goods, a tightening job market, and high inflation were taking a toll on the retail industry, and Target just so happened to be hit by trends.
As Smead’s report suggests, Target’s dip in sales was at least partially attributable to the boycotting efforts, with the company reassessing the situation in May and correcting enough to avoid the brand damage that Bud Light has suffered recently under similar circumstances.
“Target was our worst performer in the quarter, primarily driven by customers and public reaction to in-store promotions for the month of June. We believe management has listened to its core customers, made the necessary changes, and avoided structural damage to the brand,” says the report.
Backing Up A Bit
As we previously reported, there is an ongoing culture war surrounding the issue of “Woke Capitalism,” with corporations scrambling to advance diversity, inclusion, and climate change policies at the behest of public demand and pressure from politicians and financial backers.
This concept has drawn bipartisan criticism, with conservatives angry that these ideas are being normalized and institutionalized and progressives frustrated with “Rainbow Capitalist” ideas being used to run cover for large unethical corporations.
Erik Carnell, a transgender clothing designer who created the “Satan Respects Pronouns” T-Shirt, responded to Target’s withdrawing some of his items in a May interview, saying, “It’s a very dangerous precedent to set, that if people just get riled up enough about the products that you’re selling, you can completely distance yourself from the LGBT community, when and if it’s convenient. If you’re going to take a stance and say that you care about the LGBT community, you need to stand by that regardless.”