The big-box US retailer Target is struggling to return to growth a year after backlash against LGBT+ themed merchandise triggered sharp declines in sales, while arch-rival Walmart is luring more of the affluent customers that form the backbone of its business. 

Target won legions of fans starting in the 1990s with stylish in-house brands and advertising that lent its stores an aura of affordable chic. Annual revenue exploded to more than $100bn after the onset of Covid-19 as cash-rich consumers found they could buy most anything they wanted in a single place, minimising the risk of contagion. 

But sales have faltered as inflation leads shoppers to put fewer items in its iconic red plastic shopping carts. Some observers wonder if Target — affectionately called “Tarzhay” by regulars — is losing cachet. 

“They have a pandemic hangover,” said Chris Walton, a former Target executive who runs Omni Talk, a retail sector-focused media company. Target declined to make executives available for interviews.

In the past week Target announced a series of changes as it tries, in the words of chief executive Brian Cornell, to “get back to growth”. The Minneapolis-based company started a search for a new chief marketing officer less than a year after the current one, Lisa Roath, took the job (she is moving to a new role next year). 

Target also announced a deal to allow some third-party merchants from Shopify, the Canadian ecommerce platform, to sell products through its online marketplace. And it rolled out plans to load a generative AI chatbot on the devices carried by clerks at its nearly 2,000 US stores to improve efficiency. 

To boost sales volumes, Target is cutting prices on thousands of products from sports drinks to laundry soap this summer.

The changes come after a dismal year for Target even as several other mass merchandisers flourish. Comparable sales have declined in each of the past four quarters. Executives predict a modest improvement over the course of the fiscal year, with sales ranging between unchanged and up 2 per cent. 

The sales decline began a year ago, when in addition to the effects of inflation and higher interest rates Target dealt with a backlash — including bomb threats to stores — against LGBT+ oriented merchandise prominently displayed to celebrate Pride month in 2023. Complaints centred on items for children and “tuck-friendly” women’s-style adult swimsuits with extra room for a wearer’s penis.

Comparable sales in the second quarter of 2023 shrank by 5.4 per cent, the most since the global financial crisis, in part due to what an executive called a “strong reaction to this year’s Pride assortment”.

The controversy illustrated how consumer brands endorsing social issues have become enmeshed in American culture wars. On Thursday, Tractor Supply, a farm and garden retailer, eliminated diversity and inclusion goals and said it would stop sponsoring Pride festivals after pressure from rightwing critics began to drive down its share price.

Target this year said it would sell Pride month merchandise online and in some, but not all, stores. One store visited by the Financial Times this week contained no signs of it, while another featured a Pride kiosk in the middle of the store with rainbow-adorned dresses, shirts and totes and packs of multicoloured “LED Pride string lights”.

The amount of negative feedback around the Pride collection, both internally and externally, has been significantly lower this year than in 2023, a company representative said.

Steven Shemesh, a retail analyst at RBC Capital Markets, said the financial impact of the Pride controversy was temporary, making the continued softness in sales a sign of deeper issues.

Target was particularly vulnerable to the inflation surge because of its heavy dependence of discretionary items such as linens, home decor and toys, which consumers spent less on as they stretched their dollars on staples. Groceries accounted for 23 per cent of its sales last year compared with 60 per cent for Walmart. “Whenever there’s a macro slowdown, they’re more exposed,” Shemesh said. 

This exposure has been reflected in Target’s share price: up 2 per cent in the past two years, while the S&P 500 index has rallied by 43 per cent and Walmart by 66 per cent.

Cornell’s plan to restore growth includes adding more than 300 stores to increase annual sales by about $15bn in 10 years, while remodelling hundreds of others. New private-label brands will be launched as they “help keep our edges sharp on the newness, discovery and affordability consumers crave in the market and find at Target”, he told an investor event earlier this year. The company aims to return to the 6 per cent operating profit margins it routinely surpassed before the pandemic.

Survey data from Numerator, a market research group, showed Target customers are more likely to be middle or high income, younger, female and urban or suburban. They include shoppers such as Stacy Irwin, a resident of an affluent suburban New Jersey town who this week dropped into a Target store to buy bedsheets. 

“If there was a Walmart nearby I’d end up there more for its prices, but the vibe here is a little bit . . . cooler,” the mother of two said. 

Walmart has been making inroads with richer consumers, however. The world’s largest retailer’s US sales have been rising, in contrast with Target’s, and it recently flagged households making more than $100,000 a year as a major source of demand. 

“My immediate reaction was, ‘That is bad: they are Target’s bullseye,’ so to speak,” said Toopan Bagchi, a former vice-president at Target who leads Starship Advisors, a retail consultancy. “It’s concerning from Target’s perspective that Walmart saw an increase in traffic from Target’s traditional stronghold of higher-income consumers, because Target’s business model relies on those consumers to buy a lot of discretionary, non-food items with higher margins.” 

Target’s heavy reliance on in-house private-label brands means that its announced price cuts could cause a bigger sales hit than markdowns where outside vendors share the pain. “Historically, price wars do not benefit retailers’ margins,” said Jodi Love, a portfolio manager at T Rowe Price who holds Walmart but not Target in her funds.

Walmart, Target and other store-based retailers have poured money into ecommerce as Amazon disrupted their brick-and-mortar businesses. Amazon has a 40.4 per cent share of US retail ecommerce, far surpassing Walmart’s 7.8 per cent and Target’s 1.7 per cent, according to Emarketer.

Oliver Chen, a TD Cowen analyst, said Walmart’s ecommerce business was on a quicker path to profitability than Target’s. BNP Paribas Exane, the only broker with a sell rating on Target, argued that online market share gains from rivals including Amazon, Walmart and China-based deep discounter Temu threatened Target’s $106bn in total sales, not just online sales. 

Target has tied most of its digital growth to its store footprint, enabling online customers to pick up orders at their local outlet or receive a speedy home delivery. “So if you think store shopping will wind down anytime in the next decade, we’ll politely disagree on that point,” Cornell told analysts earlier this year.

JERUSALEM — Sen. John Fetterman, D-Pa., has cultivated an image in Congress as an unapologetically brash, progressive Democrat.

On his first visit to Israel, he was unapologetic about breaking with progressives on one main issue: his support of Israel’s war with Hamas and his embrace of Prime Minister Benjamin Netanyahu.

In an interview with NPR in Jerusalem on Thursday, before the CNN presidential debate, Fetterman said progressives who refuse to vote for President Biden over his handling of the war in Gaza could cost Democrats the election.

“De facto, you’re supporting Trump,” he said. “If you’re willing to play with that kind of fire, you really should be willing to own that, if that’s the way it goes.”

Fetterman’s trip to Israel was sponsored by the Senate’s banking committee, and he discussed Hamas’ illicit financing with Israeli officials. But the thrust of his visit was to acquaint himself with a country he had never visited before but ardently supported since Hamas’ Oct. 7 attack that prompted Israel’s ongoing offensive in Gaza.

The senator wore his signature sweatshirt in an hourlong meeting Wednesday with Prime Minister Benjamin Netanyahu, who praised Fetterman for his “courageous and heart-warming” response to pro-Palestinian demonstrators gathered outside his home earlier this year: he face them off holding up an Israeli flag.

“I want to thank you for your — your courageous statements that show moral clarity and moral courage. And you just say it the way it is,” Netanyahu said.

Support for Israel puts Fetterman in conflict with some progressives

Fetterman’s support for Israel has confounded many progressive Democrats who are angry at the high civilian death toll in Gaza from Israel’s bombing campaign and the extensive destruction that has come with it.

The senator did not articulate any specific person or moment in shaping his pro-Israel views. He told NPR he has studied history, and that a visit to Israel’s Holocaust memorial in Jerusalem clarified his view that Israel’s conduct in Gaza is not a genocide, as pro-Palestinian demonstrators have argued.

“I’m not gonna pander to them,” Fetterman said about progressive pro-Palestinian voters who have protested outside his offices and home.

He mentioned a Palestinian mother and her children he observed in Jerusalem’s Old City, and his empathy for Gaza’s civilians in the war.

“I don’t assign to them higher value on my children’s life than I would for any Palestinian children in the middle of this, or Israeli children as well,” Fetterman said. “I think the difference is…your anger and your frustration should be directed at Hamas for how they’ve designed this.”

Netanyahu to address Congress next month

Netanyahu, who leads an ultra right-wing coalition government, is a lightning rod among Democrats. He has sparred with the Biden administration over its supply of ammunition to Israel during the war, and many Democratic Congress members, mostly in the House, are considering boycotting Netanyahu’s upcoming address to a joint session of Congress July 24.

Fetterman told NPR that would be “bad performance art.” He was confident most Senate Democrats would attend Netanyahu’s address.

“I think the more people that don’t show up, the more that kind of division would only allow Hamas to feel more positive about the situation,” Fetterman said.

The same day he met Netanyahu, six prominent Israeli figures including a former prime minister and former spy chief of Netanyahu, urged Congress to rescind its invitation to Netanyahu, arguing it would unfairly serve Netanyahu’s domestic political need to prop up his lagging support in the Israeli public over the war.

Fetterman defended the invitation.

“Congress can’t be played as suckers. I think mostly they’re savvy professionals that understand that they’re going to be optics and [there is] going to be an agenda,” Fetterman told NPR. “Let’s not ever forget that this is the democratically elected leader of this nation. And that’s our special ally. And we — he deserves the opportunity to speak to the body, the legislative body that voted for billions of dollars in their support.”

On his visit, Fetterman met with Israeli officials as well as centrist politicians from the Israeli opposition.

Among his highlights of the trip: drinking coffee in Jerusalem’s Old City from a centuries-old family purveyor — “it’s much different than a Starbucks in some strip mall” — and staying at the King David Hotel.

The fabled hotel displays the signatures of famous guests along a hallway, like a walk of fame. The list includes U.S. presidents and other world leaders.

The guests who impressed him the most: the heavy metal band Metallica.

“Any hotel that has Metallica signing that they stay here — like, that’s, it’s pretty great,” he said.

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BlackRock has thrown its weight behind a coalition of US police and firefighter labour groups that is making the case for getting politics out of pensions, in its latest effort to navigate the backlash to environmental, social and governance investing.

The world’s largest money manager is the only financial group among the founding members of the Alliance for Prosperity and a Secure Retirement, a Delaware-registered non-profit that warns on its website that “politics has no place in Americans’ investment decisions”. After coming under fire over its advocacy for sustainable investing, BlackRock has increasingly highlighted the primacy of investor choice.

A handful of small business and consumer non-profits are also members of the alliance, which launched earlier this year amid a flurry of ESG-related activity. Forty-four state legislatures considered 162 bills in 2023, and 76 more proposals have been put forward this year, according to law firm Ropes & Gray. Roughly 80 per cent of the proposals sought to ban consideration of sustainability factors, while the rest actively promoted it.

“We are not pro-ESG. We are not anti-ESG. What we are is ‘pro’ letting investment professionals, who have a fiduciary duty to their beneficiaries, do the work that they’re supposed to do,” Tim Hill, a retired Phoenix firefighter who is president of the alliance, told the Financial Times. “We are ‘anti’ politicians, from either the right or left, interfering with that fiduciary duty so they can carry out a political, social agenda.”

Hill said the group had been set up to rally pension industry participants in support. “We decided we were going to try and take this different tack of enlisting the industry to assist us, primarily in the financial burden of pushing back and protecting our funds and fund managers,” he said.

BlackRock said in a statement that it was “proud” to back the alliance, adding: “As a fiduciary, our mission is to help more people experience financial wellbeing in all phases of life. The alliance is one of many organisations that BlackRock supports which are committed to helping more Americans retire with dignity on their own terms.”

The $10.5tn money manager has been at the centre of the political fight over ESG since 2020 when chief executive Larry Fink beat the drum for sustainable investing, pledging in his annual letter to make “sustainability integral to portfolio construction and risk management . . . governments and the private sector must work together to pursue a transition that is both fair and just”.

BlackRock became a target for both Republican politicians who objected to what they described as “woke capitalism” and progressives who wanted the firm to go further in forcing its investee companies to decarbonise.

In the past three years, BlackRock’s stewardship has become much more sceptical of climate-related shareholder proposals. Last year it voted against most of them, saying the others were too prescriptive or were not in the financial interest of its clients. At the same time, assets in the firm’s largest ESG fund have halved since late 2021.

BlackRock revamped its lobbying and public relations operations last year, and Fink has been putting far more emphasis on pensions policy and infrastructure investment. He used his 2024 letter to warn of a looming retirement crisis caused by changing pension and working patterns.

BlackRock’s website lists the Alliance for Prosperity as one of 13 organisations that it is working with to encourage discussion of retirement issues. The group is backed mostly by public safety unions, which have a history of being more conservative on climate and social issues than some of their counterparts in service industries. It also includes a federation of builders’ unions whose pension funds have $800bn in assets, including the US’s largest electricians’ union.

The group has approached more liberal unions, including at least one big teachers’ union but so far none have them have joined.

Hill said that for several years, labour groups and pensioners have grown more concerned that politicians view pension funds as “a pot of money that they could use to enact whatever their current political or social agendas were”.

“It’s always labour who does the work, pays the political cost, and pays the financial cost to defend [pension systems], typically without any help from the rest of the industry,” Hill said.