Target said its general warnings were sufficient, but a federal judge said that may not be true.
Target shareholders have survived a motion to dismiss in a lawsuit brought over Target’s promotion of pro-LGBT gear.
Target’s motion was turned down by U.S. District Judge John Badalamenti, who said the available evidence shows that Target might have misled investors about the risks of its new Pride Month campaign.
Target in its annual reports issued general warnings about possible backlash to diversity, equity, and inclusion (DEI) efforts, but did not specifically outline the risks of promoting Pride Month gear, an omission that plaintiffs said violates federal law that bars companies from engaging in manipulation or deception with regards to securities.
Target said its general warnings were sufficient, but the judge said that may not be true.
“Defendants’ general warning in their risk disclosure could be materially misleading because it was not specifically tailored to the risks from their 2023 Pride Month Campaign,” Badalamenti said in a 43-page ruling, referencing Target’s 2021 statements.
Target pointed to public news reports about its favoring LGBT initiatives to defend the lack of specificity in its 2022 statements, but company officials “overlook that none of the paragraphs they cite mention Target’s plans for a new and aggressive 2023 Pride Month Campaign,” the judge added later.
“Upon review of the amended complaint and the parties briefing, it is unclear whether this information was publicly available, and it is further unclear how much information investors and Plaintiffs knew about the plans for the new campaign,” he wrote. “Thus, Plaintiffs have adequately pleaded that information revealed in the 2021 and 2022 risk disclosures may not have been complete.”
Target did not immediately respond to a request for comment.
The Pride Month promotion in 2023 sparked widespread boycotts. Amid the backlash, Target lost tens of billions of dollars in market valuation and sales slipped. Target this year displayed a more limited selection of Pride Month products.
