Target learns tough lesson after sales slump due to backlash from Pride merchandise fiasco

Target’s sales downturn during the second quarter amid ongoing consumer backlash from the retailer’s Pride merchandise could be a valuable lesson for other businesses, according to financial gurus. 

The retail giant announced that comparable sales slipped 5.4% while the $24.8 billion in total revenue was 4.9% lower than last year during an earnings call with investors on Tuesday. FOX Business’ "The Big Money Show" co-host Brian Brenberg feels it was a fascinating quarterly report after Target CEO Brian Cornell admitted "an ever-changing operating and social environment" taught the company a lesson. 

"Clearly the Pride month backlash by consumers had a huge effect. I mean, particularly on sales," Brenberg told Fox News Digital. 

TARGET’S PRIDE MERCHANDISE LEADS TO SALES SLUMP

"That's a that's a big deal for a retailer like that, especially when you're watching peers like TJ Max really knock it out of the park," Brenberg continued. "I think their concern for Target, and for investors watching Target, is this backlash going to have an enduring effect on how people think about Target and whether they want to shop there?" 

Target locations across the country stunned customers in May when massive June Pride Month displays were unveiled featuring everything from female-style swimsuits that can be used to "tuck" male genitalia to mugs that said "gender fluid." The polarizing Pride merchandise also included onesies and rompers for newborn babies, a variety of adult clothing with slogans such as "Super Queer," party supplies, home decor, multiple books and a "Grow at Your Own Pace" saucer planter.

Many customers were outraged, and boycotts caused a variety of banks to downgrade Target's stock. Following the rollout, Target's market value has fallen to $57. 7 billion from $74 billion. Earlier this month, America First Legal (AFL) filed a shareholder lawsuit against Target in response to the significant backlash and drop in stock price. 

Brenberg said it "remains to be seen" whether Target can restore its reputation, and he isn’t sure the retailer knows the answers. 

"I mean, in the earnings call, they said that we're monitoring that kind of shifting social environment, and we want to adapt, but I don't know that they've really been able to signal that they've got a handle on this," Brenberg said.

"For folks who really had a problem with what was happening with Target's approach to the Pride Month displays and so forth, I mean, they really they have shifted the way they think about shopping there," he continued. "The way that they're approaching it is, ‘OK, what do I need, and where could I get it? Is there any other option besides Target?’"

Brenberg noted that most Americans would likely resort to Target if they can’t find desired items elsewhere, and back-to-school shopping might really help the retailer in the short term. 

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"They may see a little bit of a customer return for that. But I don't know if that is a good signal of an ongoing return to Target or if that will turn out to be more of a blip for them over the next couple of months," Brenberg added. 

Target isn’t the only major brand to polarize consumers with polarizing social issues, as Bud Light has famously suffered since celebrating a transgender social media influencer’s one-year anniversary of "girlhood." 

"Every board of directors of any publicly traded mass-market company like a Bud Light, like a Target, absolutely has to step back and look at what they're doing and rethink it. I mean, you have to," Brenberg said.

"It's hitting the mass-market brands. You know, Bud Light is a mass-market brand. They make money because they sell a lot of beer, not necessarily because they sell great beer. They have a lot of customers. Target is the same thing," he continued. "They need a lot of different kinds of people from all walks of life to buy their stuff. They can't afford to alienate, especially, you know, people who have been great consumers for them in the past."

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"Investing Is Your Superpower" author Shinobu Hindert, a Certified Financial Planner, feels Target earnings being down is twofold. 

"Backlash from the Pride merchandise that they had out there had an impact. But also, even though the inflation numbers look like they're coming down, for a lot of people, their day-to-day expenses have gone up, and they continue to stay up," Hindert told Fox News Digital. 

Hindert believes that many Americans are prioritizing things like summer travel plans, or even attending a Taylor Swift concert, before spending their cash on things like clothing and household items. 

Cornell even noted that "guests are out at concerts, they are going to movies, they are enjoying those experiential moments and are shopping very carefully for discretionary goods" during the earnings call. 

But the Pride backlash clearly played a significant role, and Hindert was "relieved" to hear Target honchos tell the truth on Tuesday’s earnings call. She agrees with Brenberg that other major brands need to learn from Target’s mistake. 

"I think brands will consider this going forward, not to maybe make a huge jump politically in one direction or the other, because we're all entitled to our opinions. We might, even as consumers feel differently about a hot topic from one month to the next," Hindert said. "So, instead of trying to take sides in an issue is, there is other ways to present what they care about and to offer it without having it be so polarizing to its consumers."

Hindert isn’t sure that Pride itself is too polarizing for brands to embrace, but the juice simply might not be worth the squeeze. 

"I think spending huge, millions and millions of dollars on a campaign that is very laser focused is a mistake for most large brands in general, because the seasons will change, the tide will change, and maybe people's opinions will change. I think big retailers can learn from this to maybe not jump in with tons of marketing spend until we also take a look at the climate of what's going on," she said. 

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As Target and Bud Light both suffer from ongoing backlash, Brenberg and Hindert both feel one of the companies has an advantage when it comes to potentially rebounding. 

"It's very, very, very easy to switch beers. All you have to do is go into the exact same store that you always go into and look one shelf to your right, or to your left, and you can switch. Target, I would argue, is slightly more difficult than that because a lot of people got used to shopping for some of their essentials at Target," Brenberg said. "It's a little bit harder maybe to replace Target in your daily routine than it is a Bud Light."

Hindert added that Target "definitely has a better chance of rebounding" than Bud Light because the big-box retailer offers so many fundamental products.

Target confirmed "adjustments" to the Pride merchandising plans were underway in May after Fox News Digital learned it rolled back displays at some of its locations. A Target insider told Fox News Digital that some Southern stores were told by the corporation to move LGBTQ Pride merchandise away from the front of their locations after customer outrage to avoid a "Bud Light situation." Target said the displays were dialed back to protect employees against threats from angry customers. 

The retailer took heat from both sides, as some in the LGBTQ community became outraged when the displays were dialed back ahead of Pride Month. 

Fox Business’ Joe Toppe contributed to this report. 

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