New York (CNN) — Target was sued Thursday by Florida and America First Legal for allegedly concealing the financial risks of its diversity, equity and inclusion (DEI) programs and its 2023 Pride Month merchandise collection.
The lawsuit was brought by Florida Attorney General James Uthmeier, a Republican, and America First Legal, a group started by White House deputy chief of staff Stephen Miller, on behalf of a Florida board overseeing state pensions and other state investments.
The lawsuit against Target is the latest conservative attack on companies’ efforts to promote diversity in employee representation, customer marketing and other areas. The suit comes almost a month after Target scrapped some of its DEI policies following pressure on the right and President Donald Trump’s attempts to use the power of the federal government to roll back DEI in the private sector.
But Target’s retreat on DEI has provoked backlash and calls for boycott on the left, including from civil rights groups and the heirs to one of Target’s founders. They want Target to stand up for diversity as a goal rooted in sound business practices, as the company had done for many years prior.
The lawsuit suit shows that Target is essentially getting squeezed from both sides on DEI.
Target did not respond to CNN’s request for comment on the suit.
Pride Month in 2023
There’s a long backstory to the suit, which alleges that Target’s DEI initiatives led to its 2023 Pride Month merchandise that drew the ire of conservative media figures.
That year, several viral posts on social media claimed that Target’s “tuck-friendly” swimsuits for transgender customers were being sold to children, which the Associated Press debunked. The response became hostile, with violent threats levied against Target employees and instances of damaged products and displays in stores. Target removed certain items that caused the most “volatile” reaction from opponents to protect its workers’ safety, but Target’s response frustrated supporters of gay and transgender rights, who said the company caved to bigoted pressure.
Target’s quarterly sales fell following Pride Month in 2023 for the first time in six years, although they recovered in the following quarters.
This is America First Legal’s second lawsuit against Target alleging fraud for the backlash to Pride Month in 2023. The first case remains ongoing.
“This is part of a new and growing trend of using securities lawsuits to attack corporate DEI programs, challenging whether risk disclosures were adequate,” said Jason Schwartz, an attorney at Gibson Dunn. “This kind of public-private partnership with state attorneys general will likely pave the way for others to follow.”
It is a “very tough case to make,” he said. “Securities cases based on inadequate disclosures in general are difficult to prove, and here especially” where the topic is disclosure about risks of social issues.
Backlash to Target’s DEI retreat
Although the lawsuit stems from Pride Month two years ago, it comes as Target’s DEI policies are front and center.
On January 24, days into the Trump presidency, Target announced it was eliminating hiring goals for minority employees, ending an executive committee focused on racial justice and making other changes to its diversity initiatives.
Target said it had a new strategy called “Belonging at the Bullseye,” which it first introduced last year, and the company remained committed to “creating a sense of belonging for our team, guests and communities.” Target also stressed the need for “staying in step with the evolving external landscape.”
But no company has faced as fierce a blowback from DEI supporters as Target. Target is under more heat than companies like Walmart, John Deere or Tractor Supply because it went further in its DEI efforts, and it has a more progressive base of customers than those companies.
There are signs that the blowback from the company’s move away from DEI may be impacting Target.
Customer visits to Target, Walmart and Costco have slowed over the last three weeks, but they have dropped most sharply at Target, according to Placer.ai., which uses phone location data to track visits. Placer.ai said the slowdown could also be attributed to weather, economic conditions and other variables.
During the week of February 10, foot traffic to Target dropped 3.9% and 1.4% to Walmart. Foot traffic to Costco, which has stood by its DEI policies, increased 4.6%.
The-CNN-Wire
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