Target was hit with a class-action lawsuit on Friday after shareholders alleged the national retailer misled investors about the risks of its DEI initiatives, which led to consumer boycotts and its stock price to tank.
The class action suit, led by the City of Riviera Beach Police Pension Fund, alleges that Target misused investor funds for “political and social goals,” and duped investors into buying stock at “artificially inflated prices.” The suit claims that Target made fraudulent public statements regarding the board overseeing the risks of its DEI initiatives, and the executives and board misled investors about the risks those programs posed.
Target’s stock price plummeted 22% on Nov. 20, 2024, destroying nearly $16 billion in market cap in a single day after the retailer reported disappointing earnings. The dive in prices came after Target became embroiled in a nationwide controversy surrounding its DEI and Pride initiatives.
The retailer faced severe backlash in 2023 after they sold “tuck friendly” female-style bathing suits and mugs displaying the term “gender fluid” as part of their Pride store displays. Target executives were forced to hold an emergency meeting as they feared consumer backlash would lead to a “Bud Light” situation. Target’s sales fell 5.4% in the quarter ending Jul 2023, the first time its sales dropped in six years, according to the lawsuit.
The lawsuit claims that Target’s board only oversaw the risks of not adopting DEI and ESG initiatives, and was only concerned with backlash from the left. The left-wing backlash Target was concerned with was not authentic, the suit alleges, and was instead associated with nonprofit “stakeholders” that the store was actively working with to adopt DEI mandates which were detrimental to the business. The suit claims that the so-called risks posed by these nonprofits was little more than a pretext to establish DEI mandates in the first place.
Additionally, Target’s CEO Brian Cornell and board failed to disclose the “known risks” of the store’s 2023 and 2024 Pride campaigns, the lawsuit alleges.
“This deceit, through misleading statements in the Company’s public filings, including its 10-Ks and proxy statements, caused Target’s investors to purchase Target stock at artificially inflated prices and to unknowingly support Target’s Board and management in their misuse of investor funds to serve political and social goals,” the filing stated.
Target allegedly had executives implement their DEI initiatives who had “disabling” conflicts of interest. Senior executive Carlos Saavedra and Vice President and Chief Food and Beverage Officer Rick Gomez both held positions at the LGBTQ rights organization GLSEN. The lawsuit alleges that these roles imposed “conflicting duties” on the executives.
“Target’s chief diversity officer also indicated her personal commitment to advancing ‘racial equity’ for its own sake, even if it was ‘provocative,’ and singled out ‘white women’ for special obligations to this cause,” the lawsuit claimed.
The company announced it was rolling back its DEI programs in January. In response, organizers of the Twin Cities Pride Festival have announced that the retailer is no longer welcome at the Minnesota parade.
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