WSJ What’s News - Boycott Over Diversity Dents Target’s Sales

Episode Date: May 21, 2025

P.M. Edition for May 21. In its first quarter earnings reported today, Target’s sales declined more than analysts expected and the company lowered its outlook for fiscal 2025. WSJ reporter Sarah Nassauer discusses the challenges facing Target’s business. Plus, a meeting between President Trump and South African President Cyril Ramaphosa grew tense over Trump’s unsubstantiated claims that white South Africans were the victims of a possible genocide. And a report from the Boston Fed examines potential risks of the rapidly expanding nonbank lending, which is often financed by banks. Platform editor Isaac Taylor breaks down what that means. Alex Ossola hosts. Boycotting Target: A WSJ Podcast Series Sign up for the WSJ's free What's News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

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A boycott over Target's diversity policy dents the retailer's first-quarter sales. Plus, Boston Fed economists warn that the growth of private credit comes with risks. If private credit lending is growing because these loans are being made to riskier borrowers, then it could lead to an accumulation of greater systemic risk and weaken the financial system. And tensions flared between President Trump and the South African president over alleged claims of genocide of white South African farmers. It's Wednesday, May 21st. I'm Alex Osola for the Wall Street Journal.

This is the PM edition of What's News, the top headlines and business stories that move the world today. Target's troubles are mounting. The retail giant reported tepid first quarter results this morning. In a three months ended May 3, comparable sales fell 3.8 percent, a steeper drop than analysts expected. The company lowered its forecast for the fiscal year. Sarah Nassauer

covers large retailers for the Wall Street Journal. Sarah, what happened here? What is affecting Target sales? Target is sort of being hit by a multitude of things. They called out the overall macroeconomic environment, weak consumer confidence, lower spending on discretionary items, so like the things you want but might not need, as well as negative reaction to some of their DEI changes from earlier this year. About those DEI changes, Target CEO, Brian Cornell, alluded to them in this morning's earnings call.

Every day in everything we do, we will continue to be anchored in the belief that creating an environment where people feel included, supported, and respected makes us a stronger company. It helps us build and support our talented team, serve millions of guests in all 50 states, and be a valued partner in the communities we serve. So Sarah, some of the negative reaction to the DEI changes

included a number of nationwide boycotts. How did the company talk about those during the earnings call? They talked about it as one of several factors that dampened sales and traffic to their stores in the most recent quarter. They didn't really get into details beyond that, beyond saying that they couldn't really quantify how much the boycott versus other factors negatively impacted sales. So we've seen earnings come out this season from some other big retailers like Home Depot and Walmart.

Are some of the issues that made Target sales fall also affecting these other places or is it really just unique to Target? Yeah, some of the issues are definitely affecting other retailers, especially this idea that people continue to need to spend more on needs, right? Groceries prices have been elevated compared to pre-COVID now for years. And the tariff situation looks like it's adding to that to some extent. Walmart, Home Depot, both called out the fact that people continue to spend pretty cautiously

on discretionary items. However, both Walmart and Home Depot reported a sales lift, and in Walmart's case, a pretty strong sales lift. That's in part because Walmart sells a lot of groceries, and a lot of groceries that are less expensive than other places, and they're known for low prices, and that's a real draw on this environment. But there's also some things that Target flagged and that analysts and others

have flagged that are also self-inflicted at Target. Target did lower its forecast for this fiscal year. What does the future look like for them? They have talked a lot about leaning further into their Tar-Gé image, which really is the idea that you can get trendy things that aren't that expensive there, and having a lot of new and exciting products, and thinking about prices. They talked about the tariff environment

and that their goal is to keep prices as low as possible and not raise prices if they can and mitigate it other ways. Their approach is do more of what they have been doing, which is leaning into this idea of interesting new things and lowering prices. That was WSJ reporter Sarah Nassauer. Thank you, Sarah. Thank you.

And you can hear more about Target's rollback of DEI policies and the impact of consumers boycotts on the company and the black entrepreneurs with products on Target's shelves in our special two-episode series, Boycotting Target. We'll leave a link to this series in the show notes. Stocks finished lower today after a disappointing Treasury bond auction accelerated a sell-off in the debt market. The Nasdaq dipped about 1.4 percent, the S&P 500 dropped roughly 1.6 percent, and the Dow fell more than 800 points, or 1.9 percent.

Top Republicans Top Republicans pushed for a quick vote on President Trump's multi-trillion dollar fiscal package today as negotiators r race to find the right combination of tax breaks and spending cuts to please warring wings of the party. Passage would mean a major win for Trump, marking a step towards extending tax cuts and cementing other conservative priorities. But the fate of the measure is still up in the air. This afternoon, some holdouts warned that the legislation was unlikely to cross the finish line by House leaders target of later today.

As House Speaker Mike Johnson was leaving for an afternoon meeting at the White House, he said that the bill was moving along on schedule and that he was optimistic. South African President Cyril Ramaphosa came to Washington seeking what he called a reset in relations with the U.S. But his meeting with President Trump in the Oval Office today devolved into a tense exchange over perceived threats to white farmers in South Africa. During a lengthy back and forth in front of television cameras, Trump repeatedly made unsubstantiated claims that white South Africans were the victims of genocide, and he alleged

that the country's government wasn't doing enough to protect them. Rimaphosa pushed back against Trump's claims. There is criminality in our country. People who do get killed, unfortunately, through criminal activity, are not only white people. The majority of them are black people. And we have now been utilized. The farmers are not black. The farmers are not only white people. Majority of them are black people. And we have now been utilized. The farmers are not black. I don't say that's good or bad,

but the farmers are not black. Since returning to office in January, Trump has cut off foreign aid to South Africa and invited Afrikaners, descendants of Dutch, German, and other settlers who speak the Afrikaans' language, to immigrate to the US as refugees and become fast-track citizens. The first group of several dozen Afrikaners arrived

for resettlement this month. The Pentagon said today that it had formally accepted a donated $400 million luxury airliner from Qatar that President Trump has said will serve as Air Force One. The decision to accept a donated commercial aircraft has raised security and ethics questions since Trump disclosed the offer last week during his trip to the Middle East. The administration has said the plane would go to the Trump presidential library at the end of his term.

Coming up, why economists from the Boston Fed warn that private credit growth comes with risks to the financial system. That's after the break. will rise each morning. You can bet your bottom dollar that you'll always need air to breathe and water to drink. And of course, you can rest assured that with Public Mobile's 5G subscription phone plans, you'll pay the same thing every month. With all of the mysteries that life has to offer, a few certainties can really go a long way. Subscribe today for the peace of mind you've been searching for. Public Mobile. Different is calling. As we've talked about before on the show, the private credit industry has expanded quickly. That's in part thanks to investment banks financing the private credit firms, who in turn make loans to riskier borrowers. Now in a new report out today, economists at the Federal Reserve Bank of Boston have

examined the potential risks of this non-bank lending. For more, I'm joined by platform editor Isaac Taylor. Isaac, break down for me the relationship between private credit firms and investment banks. Isaac Taylor, Platform Editor The relationship between private credit firms and investment banks is characterized by increasing interconnectivity. Specifically, banks lend money to those non-bank lenders, including the firms and business development companies themselves, which in turn make loans to businesses.

This means banks are indirectly funding the private credit industry's lending activities. I heard someone characterize this as a symbiotic relationship. Is that right? Like they both kind of lift each other up? It could definitely be characterized in that way. In some instances, they do compete against each other for deals, but oftentimes with private funds, they will collect capital from institutional investors like pension funds or endowments.

And until that capital actually comes in, sometimes they will borrow from banks to go ahead and get that capital working. Okay. So what about this is the Boston Fed saying is risky? The Boston Fed economists are saying that this relationship is risky because banks could be indirectly exposed to the higher risk taken on by private credit lenders. These private credit firms will often lend to riskier borrowers that banks just don't have the risk appetite to lend to.

And the concern is that if private credit lending is growing because these loans are being made to riskier borrowers, then it could lead to an accumulation of greater systemic risk and weaken the financial system. So, so far, that hasn't really happened. But if there's a potential systemic risk from those loans, does the report offer any solutions to mitigate that? Even in this report from the Boston Fed, they do lay out arguments for it and also against

it. They do believe that there are clear vulnerabilities. If private credit growth is driven by lending to riskier and riskier borrowers. And if private lenders use more leverage, it could weaken borrower resilience and lead to instability in the markets. The whole point of the report is really examining and highlighting the potential risk or vulnerabilities, as they say, and really leave it up to the market participants themselves, the banks, the private credit firms, to really come up with solutions. That was WSJ Platform Editor Isaac Taylor.

Thank you, Isaac. I appreciate it. Thank you. And Johnny Ive, a chief architect of the iPhone, and his design firm are taking over creative and design control at OpenAI. According to people familiar with the matter, OpenAI CEO Sam Altman and IVE's design firm LoveFrom have been working on a new device that will move consumers beyond screens. The people said that the former Apple employees' work at OpenAI will extend across the company's

ventures, from future versions of ChatGPT to audio features, its app, and other products. Reporter Keach Hagee told our Tech News Briefing podcast what this move means for the future of OpenAI. What you're really seeing is OpenAI is becoming a consumer products company. Not exclusively, but that's clearly where the energy is right now. They're always going to be working on these LLM models that are going to be powering things, but that is becoming increasingly commodified. They have a lot of competitors, Anthropic, Google, even Microsoft, their partners, a

competitor in some ways. And to really push things forward, it's going to be about the interfaces. And that's why they brought on Johnny Ive. And you can hear more from Keach on tomorrow's episode of Tech News Briefing. OpenAI has a content licensing deal with the Wall Street Journal's parent company, News Corp. And that's what's news for this Wednesday afternoon. Today's show was produced by Pierre Bienamé with supervising producer Michael Kosmides. I'm Alex Osola for The Wall Street Journal. We'll be back with a new show tomorrow morning.

Thanks for listening.