Target shares have been downgraded in a series of recent months due to consumer pushback against Pride merchandise.
Target’s share price fell by approximately 3.1% in the last five days, after dropping by around 18.5% the month before. The stock is now worth $59.1 billion, down from $74 billion on Friday.
This retailer has supported LGBTQ Pride for years and this season offered merchandise that included female-styled bathing suits with the option of “tucking in” male genitalia. They also sold adult clothing with slogans such as “Super Queer”, and products with labels like “Thoughtfully fit on multiple body types and gender expressions”.
Citi analyst Paul Lejuez lowered the stock price from buy to neutral and pitted Walmart against the struggling retailer. Lejuez said that Walmart will start to gain market share in a note he wrote on Friday.
Lejuez writes in his note that Target’s exposure of discretionary purchases to the current macro environment will hurt them.
“Despite the recent pressure on the stock, we cannot recommend investors to purchase it due to these dynamics.” Now, we believe that risk and reward have become more balanced. In the short term, the risk is to the downside. ”
Lejuez pointed out Target’s 13.9% drop in store traffic during the last week of May as inflationary pressures slowed consumer spending over Memorial Day weekend.
KeyBanc Capital Markets lowered the share price of the retailer to “sector weight” from “overweight” on January 1, as the agreement for the debt ceiling stipulated the student loan payments will resume. The impact of this will be felt by consumers in terms of discretionary spending. The retailer’s core demographic is young and college-educated, with a high discretionary sales mix.
JPMorgan Chase downgraded Target’s stock last week. Analysts pointed to the possibility that consumers could cut back their spending because of persistent inflation.