• by Sarah Mahoney  @mahoney_sarah, 7 hours ago

After months of speculation about the impact of DEI-related boycotts, Target is acknowledging that backlash to its social policies caused it to lose sales in the first quarter. Comparable store sales fell 5.7%, with total revenue down 2.8% to $23.8 billion, below already-muted expectations.

The Minneapolis-based retailer now expects full-year sales to decline in the low single digits, reversing a previous forecast of a 1% gain. CEO Brian Cornell also announced structural changes, including forming an “enterprise acceleration office” and the departure of Christina Hennington, chief strategy and growth officer, once seen as his potential successor.

Cornell attributed the disappointing performance to five consecutive months of declining consumer confidence, reduced discretionary spending, ongoing inflation, and “the reaction to the updates we shared on belonging in January.”

That vague phrasing refers to changes in the company’s diversity, equity and inclusion efforts, announced in the earliest days of the new presidential administration. While many other companies similarly backtracked, Target, once one of the fiercest advocates of racial equity efforts and a staunch supporter of LGBTQ+ groups, became a lightning rod.

As activist groups, including those led by  Pastor Jamal Bryant in Atlanta, called for boycotts, foot traffic has declined steadily since the January announcement, according to Placer.ai.

While Target made no explicit reference to the boycotts during its earnings call, analysts say the damage is real. Neil Saunders, managing director of GlobalData, called Target’s handling of the problems a “DEI debacle” in his note on the results. “Aside from the politics of the move, this was not handled at all well, and it has alienated some previously loyal customers.”

In something of an apology tour, Cornell met last month with Rev. Al Sharpton, a civil rights leader, in a damage control effort. But even that move met derision from alienated shoppers, with  “I didn’t know Al Sharpton was still a thing”-themed posts ricocheting around TikTok.

If anything, the rift between Target and Black consumers may be widening, with research continuing to show that Blacks, as well as younger shoppers, are more likely to boycott stores over policies they disagree with. Bryant is planning protests at Target stores on May 25, the fifth anniversary of George Floyd’s murder by Minneapolis police. USA Today reports that so far, 67 churches have joined in.

However, Saunders and other analysts note that boycotts are only part of Target’s woes. “Target continues to grapple with a competitive retail environment and deteriorating consumer confidence,” writes Noah Rohr, equity analyst at Morningstar. “With about 50% of its sales tied to discretionary product categories, the firm is exposed to cyclical swings in consumer demand, creating uncertainty for the remainder of the year."

Target executives also tried to downplay potential damage from upcoming tariffs. They said they expect to absorb “the vast majority” of costs. However, with half of the company’s goods originating outside the U.S., that seems unlikely, and Target execs conceded they would raise prices if necessary. Walmart, which sources about a third of its inventory from outside the U.S., has already signaled it will increase prices, drawing the ire of President Trump in social media posts.

Target’s net sales fell in every division except food and beverage. The company lost market share in 20 categories.

There were bright spots. Advertising revenue rose 25%, to $163 million. And the company says its fashion collaboration with Kate Spade was its most successful in over a decade.

Target is also bullish about summer. Executives on the call cited strong interest in a new Champion apparel partnership, a Nintendo Switch 2 release, and plans to position the retailer as a seasonal destination with a patriotic flair. “Americana, the Tarjay way,” one exec noted, promising red, white, and blue for the whole family.