The news: Target is facing controversy once more, this time for selling a Halloween clown costume that critics said echoed racist stereotypes. While the retailer apologized and pulled the offending item from its assortment, its shares fell nearly 4% after the news.

Why it matters: The Halloween costume controversy comes amid an otherwise encouraging stretch for Target and could threaten its nascent turnaround. While foot traffic and sales trends in the past two quarters suggested the retailer was regaining shopper trust following backlash to its DEI pullback and muted response to ICE activity at its stores, the latest incident risks reversing some of that progress.

Target also risks losing even more goodwill from Black consumers, many of whom were already steering clear of the retailer. An apology alone may do little to change their opinion of the company, and the incident itself could renew calls for boycotts.

Implications for retailers: The incident underscores the importance of having diverse perspectives and safeguards in product approval processes. While Target declined to say who was responsible for greenlighting the costume, the fact that no one flagged it before it reached the retailer’s site suggests that the company has blind spots in its review process that could hamper its ability to serve shoppers.

Alienating Black consumers could hurt Target’s ability to compete with Walmart and Amazon, particularly in areas where they represent a significant share of spending. Black households account for 20% of total discretionary spending in the South and 13% in the Northeast, per MRI Simmons.