News & Politics

Target CEO Wouldn't Have Approved LGBT Message That Helped Tank Profits

Target Corp. CEO, Brian Cornell speaks during an interview on the floor of the New York Stock Exchange November 28, 2014. REUTERS/Brendan McDermid (UNITED STATES - Tags: BUSINESS) - RTR4FZQU

On Wednesday morning, The Wall Street Journal dropped a bombshell. Almost exactly one year after Target’s original pro-transgender announcement which caused a huge backlash and helped tank the company’s profits over the past 12 months, the Journal reported that Target’s CEO did not approve of the statement — and would not have approved it, if asked.

“Target Chief Executive Brian Cornell hadn’t approved the April 19 post … said people familiar with the episode and its aftermath at Target,” the Journal‘s Khadeeja Safdar reported. “Mr. Cornell, 58 years old, expressed frustration about how the bathroom policy was publicized, and told colleagues he wouldn’t have approved the decision to flaunt it, these people said.”

“You can’t take it back,” an unnamed source inside Target told Safdar. The person added that Mr. Cornell “felt very stuck.” According to the Journal, “Target didn’t adequately assess the risk, and the ensuing backlash was self-inflicted, he told staff. Now, it was too late to reverse course.”

In late March of last year, North Carolina Governor Pat McCrory signed House Bill 2, a measure which repealed a Charlotte city ordinance forcing private businesses and public facilities to allow transgender people to use the bathroom of their choice. H.B. 2 repealed that measure, allowing businesses to make their own decisions and reserving public, non-single-stall restrooms to members of the same sex.

On April 19, Target issued a response to this bill, declaring that “inclusivity is a core belief at Target” and that the company supports federal legislation to provide “protections to LGBT individuals” which would fight “discrimination.”

This post painted something of a target on the company’s back, and the American Family Association (AFA) launched a boycott of the company, which reached over 1 million signatures in one week.

In late May, Target stock took a plunge of 20 percent, and the Reverend Franklin Graham attributed the hit directly to the transgender policy. “Target stock is tumbling after they announced a pro-transgender restroom policy allowing men to use women’s bathrooms and changing rooms,” Graham, the president of the Billy Graham Evangelical Association, declared.

At the time, Target CEO Cornell attributed the decline to “unfavorable weather trends in the Northeast.” But the losses continued.

In early March of this year, the company suffered the largest one-day stock drop since the 2008 economic crisis. In dollar terms, the drop was the company’s largest hit ever. This also followed a report of fourth-quarter profits that fell below expectations, and a pessimistic full-year outlook. To make matters worse, Target’s disappointing results contrasted with better-than-expected earnings reported by Wal-Mart Stores Inc. and Home Depot Inc.

As The Wall Street Journal reported in its story about Cornell, however, most retailers — including Wal-Mart — have a similar policy, allowing transgender people to use the bathroom of their choice. The difference is, these companies didn’t make a big deal about it.

“We value the privacy of our associates and customers, and we strive to make accommodations like family bathrooms in some stores,” a Wal-Mart spokesman told the Journal.

Perhaps this subtle, live-and-let-live atmosphere is more what customers want, rather than a public statement one way or another. In a February online survey by consulting firm Frank N. Magid Associates of 2,500 people, nearly two-thirds of respondents said businesses should stay out of politics.

“Target picked a side and pretty much said to the rest of us that we don’t matter,” Mary McCandless, a shopper in Winston-Salem, N.C., told the Journal. “They should have just left it as, ‘don’t ask, don’t show, don’t tell.'” McCandless said she quit using her Target credit card and started shopping online. “At least I don’t have to worry about using the bathroom on Amazon.com.”

Cornell, the Target CEO, was reportedly kept out of the loop when other workers made the decision to jump into the fray. The Journal‘s unnamed sources said Target workers began asking their bosses to clarify the company’s policy following the North Carolina law and the business backlash to it.

Headquarters sent an internal memo to store managers, reiterating its official stance. On April 15, a group of employees in the “risk committee” emailed executives, reporting a plan to post the message publicly and requesting approval to do so. According to the Journal, Cornell wasn’t among the recipients of that email, although two of his subordinates approved the post, including Target’s chief risk officer, Jackie Rice, and its chief external-engagement officer, Laysha Ward.

After the boycott and the stock hits, executives analyzed the impact and found that conservative families were angriest and that among moderates white men — as opposed to women, the core customer base — were most upset. Perhaps not surprisingly, the stores most hurt were in the South and often located near Wal-Mart locations. Many of the stores were physically worn down and not as competitive on prices of commodity goods.

The company has since announced plans to invest $7 billion to improve stores, launch exclusive brands, and cut prices to the tune of $1 billion. It plans to remodel 110 stores this year, a full third of which are in the Dallas-Fort Worth area, a market which lost foot traffic after the bathroom announcement.

The Journal also reported that executives — and Cornell in particular — are searching for ways to win back shoppers without changing the bathroom policy. So far, Target has used promotions and direct mailings, including commissioning Dallas Cowboys quarterback Tony Romo to visit a Dallas Target and help pick out Father’s Day gifts.

While most of Target’s shoppers identify as moderate or liberal on social issues, the business has clearly taken a hit, declining for three straight quarters.

Besides the bathroom backlash, the retail giant has been squeezed by Amazon, as shopping moves online, and by Wal-Mart, which has remodeled stores and lowered prices. Interestingly, an Amazon spokesman said his company’s policy is to let transgender employees and customers use whichever facility fits their gender identity — but most customers shop from home, so perhaps it doesn’t matter as much.

According to John Zolidis, a Buckingham Research Group analyst, the AFA boycott “seemed to matter, but there are many crosscurrents in retail, and Target has other problems.”

Even many social conservatives, who support AFA’s petition, admit they still shop there. “I tried not to go there, but it’s hard when you like the store,” Mari Arnett, a 62-year-old Colorado Springs, Colo. homemaker, told the Journal. “I just don’t care too much for Wal-Mart.”

Target announced in August that it would dedicate $20 million to add private bathrooms, an investment executives saw as a compromise. But some shoppers, like Tim Maxwell of Mansfield, Tex., said that wasn’t enough.

“It made me realize that even I can now go into the women’s bathroom with my daughter,” Maxwell told the Journal. “They opened the floodgates.”

Indeed, there have been many reports of voyeurs across the country abusing Target’s policy in order to spy on women and children.

Perhaps the greatest irony is that Target’s economic funk may outlast the very bill the company’s controversial statement was meant to protest. At the end of March, North Carolina’s new governor, Roy Cooper, signed a repeal of H.B. 2. While LGBT groups attacked his bill as insufficient, the NCAA — which had publicly withdrawn consideration of the state as a host for championship games — reversed its boycott on North Carolina.

Finally, despite the bathroom bill controversy, North Carolina’s economy continued to boom in 2016, and even an Associated Press report estimating the long-term damage of the bill only found it would cut 0.054 percent of the state’s GDP over the next 12 years.

Target’s economic doldrums might not be mostly or primarily caused by the transgender bathroom policy, but contrasted with North Carolina’s economic success, they do indeed seem suspicious. Perhaps the greatest tragedy of this whole situation is that, had CEO Brian Cornell been given a say over the statement, he would have struck it down, avoiding bad publicity and huge losses for his company.