Target stock drops 5% after Halloween costume sparks blackface backlash

By: Cris Tolomia Source: Quartz Image Credit: David Paul Morris / Bloomberg via Getty Images

Overview

Target apologized Monday and removed a Halloween costume from sale after critics said it evoked Blackface imagery, sending Target stock down as much as 5% on Tuesday.

The Controversy

The product, sold under Target's Hyde and EEK Boutique brand as the "Kids' Glows Under Blacklight Circus Clown Halloween Costume," ignited social media criticism from shoppers who said its imagery recalled racist caricatures tied to the minstrel show tradition.

"As a company, we know we got this wrong, and we are deeply sorry. The costume is offensive and should never have been part of our assortment." — Target statement

Target declined to comment on who designed the costume or to provide details about the product approval process, according to Reuters. In an internal email viewed by Reuters, Chief Merchandising Officer Cara Sylvester told employees the item "never should have been in our assortment."

Stakeholder Reactions

The apology did not satisfy some stakeholders:

• Sheletta Brundidge, a Minneapolis entrepreneur who protested Target's DEI rollbacks last year, said Target "keeps showing us who they are." Speaking to CNN, she framed the costume as a consequence of those rollbacks: "You rolled back diversity, so who's in the room, now, to say 'hey, this is wrong?'"

• A post in the BlackPeopleofReddit community, which has 1.6 million members, urged a boycott of the retailer.

• Tejal Patel, executive director of Target shareholder SOC Investment Group, called the costume "another example ... where Target has lost trust with its consumer base."

• Morningstar analyst Brett Husslein said the selloff exposed how precarious Target's market standing has become, noting that the chain must win customers through experience and goodwill rather than the low prices that drive shoppers to Walmart and Costco.

Financial Context

The controversy comes at a delicate moment for Target:

• Second-quarter net sales of $26.5 billion, a 5.3% increase from a year ago
• Full-year guidance raised after two consecutive quarters of growth
• Stock performance: Before the backlash, Target stock had surged approximately 70% over the course of the year, touching its highest point in nearly two years on Monday
• Strategy under CEO Michael Fiddelke: Reducing prices and overhauling product mix to arrest a stretch of underperformance

Expert Warnings

• Brett Husslein cautioned that as Target works to restore its standing with consumers, stumbles like this are precisely what the company cannot afford. He warned that headwinds of any kind "could lead to further market share losses," according to CNN.

• Angeli Gianchandani, an adjunct instructor at New York University's School of Professional Studies, argued that Target would do more to reassure stakeholders by publicly demonstrating improved vetting procedures than by issuing apologies after the facts.

Stock Ticker: TGT +1.15%