By Anuja Bharat Mistry and Nicholas P. Brown
Aug 25 (Reuters) - Target shares slid as much as 5% after the retailer apologized for and pulled a Halloween costume criticized for evoking Blackface and minstrel shows, renewing concerns over brand missteps during its turnaround effort under a new CEO.
The retailer has come under fire before, including over products in its 2023 Pride Collection and subsequent changes to its diversity, equity and inclusion policies after Donald Trump's return to the White
House.
Target shareholder SOC Investment Group, which has previously been critical of the company's leadership, called the matter "another example in a chain of events where Target has lost trust with its consumer base."
"Decisions including pulling back from Pride Month, backing away from diversity initiatives, and cooperating with ICE all send a signal to consumers. And we've seen how those decisions can lead to an impact on sales over the long term," said Tejal Patel, executive director of the SOC Investment Group.
TARGET'S APOLOGY FAILS TO SWAY
The product, sold as the "Kids' Glows Under Blacklight Circus Clown Halloween Costume," prompted backlash on social media as some consumers said it resembled a racist caricature.
The company said in a statement on Monday that it was "deeply sorry," adding that the costume "should never have been part of our assortment. It is no longer for sale."
"We know this is especially hurtful for our Black guests, team members and partners," it added.
Despite Target's apology, some stakeholders remain upset.
Sheletta Brundidge, a Minneapolis entrepreneur who drew attention last year for protesting Target's DEI rollbacks, told Reuters the retailer's apology "truly did not" sway her.
"Target keeps showing us who they are," she said.
TURNAROUND UNDER FIDDELKE
The recent backlash worsens challenges for the U.S. retailer, which has been navigating a tough consumer environment even as new CEO Michael Fiddelke deepens a turnaround push.
Target shares are up about 70% this year on optimism around CEO Michael Fiddelke's turnaround efforts, hitting a near two-year high on Monday.
"I would say that today's downward move of roughly 5% reflects the market’s view on the fragility of their competitive positioning when merchandising missteps or brand controversy occurs," Morningstar analyst Brett Husslein said.
FRESH CONTROVERSY REVIVES SCRUTINY
Target declined to comment on who designed the Halloween costume following the uproar on Monday and did not provide further details on the process behind the approval.
The product was sold under Target's seasonal Halloween brand Hyde and EEK, which imports much of its merchandise, according to a listing on its website.
Target imports about half its merchandise, with China accounting for the largest share, according to its latest annual report.
"An apology is not the fix. The fix is a disclosed review process that checks new products and their marketing against stated brand values before they reach a shelf," said Angeli Gianchandani, adjunct instructor at New York University's School of Professional Studies, adding that shareholders are reading this as a pattern.
"Markets tolerate one mistake. They punish a company that keeps proving it has not fixed the process behind it."
(Reporting by Juveria Tabassum in Bengaluru; Editing by Devika Syamnath and Anil D'Silva)
