Retail giant Target is facing a proposed class-action lawsuit, accusing the company of concealing risks related to its Diversity, Equity, and Inclusion (DEI) initiatives, which led to a significant drop in stock price.
The lawsuit, filed on Jan.31, was led by the City of Riviera Beach Police Pension Fund in Florida. It claims that investors were misled into paying inflated stock prices and supporting the misuse of funds for social and political purposes.
The lawsuit alleges that Target's leadership, including CEO Brian Cornell, failed to disclose the risks of consumer boycotts linked to its DEI and Environmental, Social, and Governance (ESG) policies.
It specifically points to the backlash from the May 2023 Pride Month campaign, which forced the retailer to remove some LGBTQ-themed merchandise from stores, USA Today said.
The decision was made after confrontations in stores and concerns for employee safety.
In addition to this, the company's stock price took a major hit on November 2024, after disappointing third-quarter results. Target's shares dropped 22%, wiping out $15.7 billion in market value.
This decline came after the retailer predicted weaker profits and holiday sales, in stark contrast to strong performances by competitors like Walmart.
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The plaintiffs argue that the backlash from Target's campaigns contributed to this poor performance. According to Market Insider, the class-action lawsuit seeks damages for Target shareholders who held stock from August 26, 2022, to November 19, 2024.
On Jan. 24, 2025, Target announced it would scale back its DEI initiatives, including a program to support Black-owned businesses, which it had introduced in response to the 2020 murder of George Floyd.
Despite a "Moderate Buy" consensus, with a potential upside of 9.3%, Target's stock has lost almost a third of its value over the past three years.
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