ERIK TORMOEN: Yeah. Thank you.
NINA MOINI: I read your reporting and you touch on a variety of different storms or problems that Target appears to be facing. One of those you say is they’re in the middle of a PR storm. Can you talk a little bit about that?
ERIK TORMOEN: Yeah. I think the PR storm combines a lot of different elements. One that people might know of the most is its DEI scale back. This was– Target in January announced that it was reducing some of its efforts. It wasn’t participating in external surveys anymore. A notable one would have been the Human Rights Campaign’s Corporate Equality Index, assessing companies on LGBTQ+ workplace inclusion.
It also had launched in 2020 a five-year pledge to carry more products from Black or minority-owned businesses that concluded this year. It wasn’t using DEI anymore as a term. So that was kind of maybe the biggest kind of PR blunder. And actually, yeah, CEO Brian Cornell suggested in Q1, in the first quarter, that those updates probably contributed to what ended up being an underperformance in sales.
NINA MOINI: Yeah. And a lot of people said they would boycott at that time, too. As you’re looking at these different companies and big corporations, I wonder if anyone’s really doing that well, or how are you able to see that Target is particularly struggling because there are challenges going on, like inflation or tariffs? What’s standing out to you about Target?
ERIK TORMOEN: I think it’s the gap between Target and its competitors. So yeah, Target is more of a discretionary retailer. It’s always kind of focused on more home goods, apparel, these more like fun products that you stumble upon when you’re shopping. And when times are tough, Target has always kind of dipped a little bit because Walmart is the one that competes on price, and so people go there instead.
But yeah, it’s just the gap is bigger than analysts think it should be. Just, for example, in late May on CNBC, they noted that Target’s stock had grown 14% in a decade, whereas Costco’s was up 633%, Walmart’s was up 144%. That’s just a really big gap and you can’t just look at that kind of discretionary identity that Target has as the sole explanation for it.
NINA MOINI: Yeah. And one of the reasons we are so grateful that you shared your reporting is because it’s been really hard to get in touch with Target executives and really hear directly from them, or be able to interview them at times. And I understand you also talked to a former Target executive for this story, Jerry Storch. What did he have to say?
ERIK TORMOEN: Well, yeah, Jerry Storch was really interesting because he zeroed in on groceries as basically the ground zero for Target’s problems. So Walmart is the country’s biggest grocery store. And his point is, basically, Target had an opportunity, maybe, years ago to go deeper into groceries. And it didn’t. Instead, it’s kind a little bit more of like a convenience approach to food and beverage.
And he says that this was a mistake because Target introduced groceries to drive frequency of traffic. But if you aren’t a shopper’s primary grocery store, does it actually drive frequency? Instead, he’s saying it’s kind of backwards that people still just go to Target for general merchandise, and then they might pick up a grocery item just as a convenience. And that’s not exactly what he is saying grocery should do if it’s in this type of mass market retailer.
NINA MOINI: Sure. Like the idea is if you need groceries more often, you’re going to go to the store more often than you need deodorant or whatever else. How about employees? Did you talk to any of them? What did they have to say? I wonder just about morale and where they see things going.
ERIK TORMOEN: Yeah. So some employees I spoke with did note some kind of internal discontent. The DEI message was a big part of it. They kind of cited some vagueness to that message. They weren’t exactly sure what Cornell was trying to communicate. And also, it’s just kind of backtracking on values. And that gets really tricky because it calls a company’s authenticity into question.
Target has always been a little more liberal leaning, and it has vouched for DEI initiatives and it has its pride collection. And as it’s stepping away from those things, it sounds like it’s been alienating some employees at the company.
And then there are just other things. There was a complaint about its technology systems seeming a little sluggish, to which Target responded that it has now this acceleration office. They’re targeting some of these issues. But yeah, sounds like there’s just a lot of bureaucracy and layers of approval seeking that others are also kind of pointing out as making their time there not as it was when Target was, I guess, viewed more favorably.
NINA MOINI: Back in the day, maybe. Yeah. And they’re also looking for a new CEO it sounds like. Did Target have really a response to your story or their future?
ERIK TORMOEN: No. That’s all kind of speculation right now in terms of who the new CEO will be. Other people are suggesting it’s Michael Fiddelke, who kind of has been at Target his whole career. He is the one who was appointed to lead the acceleration office. And the new CEO they’re probably, I don’t know, people are expecting they’ll announce within the next few months. But Cornell is on through the end of the year.
NINA MOINI: And who knows how big of a difference something like that really makes. But one of the things that made me chuckle in your stories, for those of us, I don’t know if this is a national thing for those of us who grew up in Minnesota when everybody was calling it “Tarzhay” if they would pair up with a fancy fashion designer, or you say, maybe the “zhay” is gone.
Is part of that just the times, like people are more online on Amazon? I noticed part of your article was it’s kind of like they’re in the ’90s, and they’re in the now.
ERIK TORMOEN: Yes. I mean, I would say I think that the “zhay” is maybe diminished. Some people would– some people do vouch for Target’s reputation. That it still has that. It still has something that sets it apart. But yes, I think eCommerce really widens just people’s– it makes shopping more convenient for people. They know if they want something specific, they can just find it.
But actually, other people I was talking with noted there’s almost this factor of discovering a treasure when you go to a brick-and-mortar retailer. You’re wandering around. You don’t expect to find this thing. There are other things on your list. And actually, I was hearing a lot that that’s what Target needs to recapture is this joy of discovery. Because actually, eCommerce can’t replicate that. Not really. Unless, I don’t know maybe if you have VR someday. But otherwise, you get browsing fatigue if you’re just clicking through these pages. It’s just not the same as–
NINA MOINI: Yeah, I could see that. So Erik, I’m curious what you’re going to be watching for in the next year or maybe their next release of their quarterly earnings. What would it take for them to get out of this and reverse it?
ERIK TORMOEN: Well, something interesting that’s hard to measure in this story was people really miss this kind of risk taking, bold, almost like avant-garde but affordable version of Target.
NINA MOINI: “Zhay.”
ERIK TORMOEN: Yes, exactly. The “zhay.” You think about even the famous like Michael Graves’ teapot they had in like 2000s. This was kind of a weird item, but it suggested taste. And yet it was also fairly affordable. So a lot of people are saying, how does Target get back to that? Because that’s– it kind of sidelined grocery. That’s sort of supposed to be its point of difference.
NINA MOINI: Well, Erik I really appreciate you coming by Minnesota Now and sharing your reporting. Hope you’ll join us again down the line and tell us more about it.
ERIK TORMOEN: Yeah, for sure. No, thanks for having me.
NINA MOINI: Thank you Erik. That was Erik Tormoen is the associate editor at Twin Cities Business.
