Target Corp. shares fell by 5% in early trading on Tuesday due to harsh social media criticism over a kids' Halloween costume that some claimed invoked images of blackface and minstrel shows.
The "Kids' Glows Under Blacklight Circus Clown Halloween Costume" was quickly removed from the store, along with an official apology.
The stock has somewhat recovered in afternoon trade despite the one-day decline, retaining much of its over 70% year-to-date gain driven by CEO Michael Fiddelke's continuous price-cutting and restructuring initiatives.
At 12:18 pm, the scrip was trading 3.56% lower at $163.82.
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The "Kids' Glows Under Blacklight Circus Clown Halloween Costume" caused controversy on social media because some customers thought it looked like a racist caricature.
In a statement released on Monday, the firm expressed its "deeply sorry" and stated that the outfit "should never have been part of our assortment." It is no longer available for purchase.
"We know this is especially hurtful for our Black guests, team members and partners," it said.
Target has apologised, but some stakeholders are still not satisfied. Minneapolis businesswoman Sheletta Brundidge, who rose to notoriety last year for opposing Target's DEI rollbacks, told Reuters that the apology "truly did not" affect her.
"Target keeps showing us who they are," she said.
The situation is "another example in a chain of events where Target has lost trust with its consumer base," according to Target shareholder SOC Investment Group, which has repeatedly criticised the company's leadership.
Tejal Patel, executive director of the SOC Investment Group, reportedly stated, "We've seen how those decisions (to pull back product) can lead to an impact on sales over the long term."
The US retailer, which has been navigating a challenging customer market while new CEO Michael Fiddelke intensifies a turnaround push, is facing more difficulties as a result of the latest criticism.
As investors applauded early benefits from Fiddelke's efforts to decrease prices and freshen up inventory, Target's shares have increased by around 70% so far this year. On Monday, the stock reached a nearly two-year high.
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"I would say that today's downward move of roughly 5% reflects the market's view on the fragility of their competitive positioning when merchandising missteps or brand controversy occurs," Brett Husslein, a Morningstar analyst, was reported as saying by Reuters.
Target has already come under fire for how it handled the items in the 2023 Pride Collection and for altering its diversity, equity, and inclusion programs after President Donald Trump took office again.
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