Our worst performer this quarter was Target (TGT, Financial). Its stock dropped 19.8% and clipped 0.5%* from the Fund’s total return due to fears that weakening consumer demand and a highly politicized retail environment will hurt sales. In May, conservative criticism of Target’s Pride-themed merchandise exploded into a backlash that included threats of violence, ransacking of stores and a popular song calling for a boycott. Liberal groups then took issue with management’s decision to pull certain Pride items and to relocate displays to the back of the store to protect the safety and well-being of store employees. Of even more concern, Target called out a $500 million loss from shrink, which involves theft of merchandise perpetrated by organized retail crime groups. Although these problems are scary, we believe the stock reaction is overdone. Long term, the company has continued to gain share based on its inviting store network, multi-category portfolio, top-rated owned-brands and data-driven investments in customer engagement.
From the Parnassus Value Equity Fund (Trades, Portfolio)'s second-quarter commentary.
