Target faces lawsuit over DEI policies amidst growing backlash

Filed on behalf of a Florida board that oversees state pensions and other investments, the lawsuit contends that Target failed to disclose the potential business risks tied to its DEI policies. This follows a broader conservative movement challenging corporate DEI efforts, with increasing legal actions targeting companies perceived as overstepping into social and political advocacy.

The legal challenge also underscores a growing trend of using securities lawsuits to contest corporate DEI policies. Jason Schwartz, an attorney at Gibson Dunn, described this strategy as a "new and growing trend" that could influence other states to pursue similar actions. However, he noted that proving such securities cases, particularly those tied to social policy disclosures, remains challenging.

Target's DEI efforts came under heavy fire in 2023 when it launched a Pride Month merchandise collection, including products aimed at LGBTQ+ customers. The backlash intensified after viral social media claims—later debunked—alleged that Target was marketing "tuck-friendly" swimsuits for transgender individuals to children. The misinformation sparked outrage among conservative activists and media personalities, leading to threats against Target employees and store vandalism.

In response, Target removed certain products from stores, citing employee safety concerns. However, this decision alienated LGBTQ+ advocates and civil rights groups, who accused the company of caving to pressure from anti-LGBTQ+ factions. The controversy had tangible business impacts: Target reported its first quarterly sales decline in six years following the uproar, though its revenue later rebounded.

Target’s troubles didn’t end with the initial backlash from conservatives. In January 2025, just days after President Donald Trump assumed office for his second term, the retailer announced a series of rollbacks to its DEI policies. These included eliminating hiring goals for minority employees and disbanding an executive committee focused on racial justice. Target instead introduced a new strategy, “Belonging at the Bullseye,” which it claimed maintained a commitment to inclusivity while adapting to shifting external pressures.

However, the move ignited fresh criticism from progressive groups, civil rights organizations, and even members of the Dayton-Hudson family, heirs to one of Target’s founders. These groups accused Target of abandoning its long-standing DEI commitments and urged the company to reaffirm its support for workplace and marketplace diversity.

The controversy surrounding Target’s DEI policies has had measurable consequences for the company. Foot traffic data from Placer.ai, which tracks retail visits using mobile phone location data, revealed a sharp decline in customer visits to Target stores in recent weeks. Compared to its major competitors, Walmart and Costco, Target experienced the steepest decline. During the week of February 10, Target’s store traffic dropped by 3.9%, while Walmart saw a 1.4% dip. Notably, Costco—despite maintaining its DEI policies—experienced a 4.6% increase in customer visits.

Retail analysts suggest that multiple factors, including economic conditions and seasonal changes, could contribute to the decline. However, the data suggests that Target’s shift on DEI is having an impact on consumer behavior, with discontent brewing on both ends of the political spectrum.

Target’s ongoing legal battle and the surrounding controversy reflect a broader national reckoning with corporate DEI policies. As companies navigate an increasingly polarized landscape, the risks of both embracing and retreating from DEI initiatives are becoming more apparent. While some businesses, such as Costco, continue to uphold DEI principles without major fallout, others like Target find themselves caught in the crossfire of America’s culture wars.

As the lawsuit proceeds and consumer sentiment evolves, Target’s response to these challenges will serve as a case study for other corporations balancing social responsibility with business imperatives. Whether the company can weather this storm without further financial and reputational damage remains to be seen.