As I have noted in prior posts (most recently here), a recurring type of pandemic-related securities suit involves companies whose fortunes prospered at the outset of the pandemic but whose performance sagged as the coronavirus outbreak evolved. The latest lawsuit of this type is the securities suit filed earlier this week against the retailer Target Corp., in which the plaintiffs allege that the surge in consumer demand at the outset of the pandemic led the company to overstock inventory, causing an inventory overhang that later undercut the company’s financial performance. A copy of the March 29, 2023, complaint against Target can be found here.


In 2020, at the initial coronavirus outbreak, Target experienced what the subsequent securities lawsuit complaint described as “unprecedented double-digit growth” as “consumers increased spending with funds provided from stimulus checks.” Despite the company’s “runaway success” in 2020, the company’s revenue was “constrained” by its “inability to keep its shelves fully stocked.” According to the complaint, the company’s “inventory struggles” were due to “two pandemic-related factors”: (1) unexpectedly greater demand due to changing consumer behavior; and (2) vendor constraints resulting in less product for the company to replenish.

To try to tackle these inventory struggles, the company began “ordering larger upfront quantities in advance of season to ensure that shelves were stocked with products consumers wanted.” Complicating this early purchasing strategy was the fact that consumers preferences continued to shift. The company assured investors that it could keep track of changing preferences because its “unique multi-category assortment” enabling the company to “flex between patterns in consumer behavior changes.” The company reassured investors that its “balanced assortment” and insight into consumer preferences afforded the company a “durable” business model.

However, the complaint alleges, during the class period the company’s strategy of “buying early” resulted in the Company “over-purchasing goods that were no longer in demand.” The company’s inventory, according to the complaint, became “out of balance,” leaving the company with “overstocked unsellable inventory taking up valuable store shelf space” and unable to pivot to meet changing preferences.

On May 18, 2022, the company reported its financial results for the first quarter of 2022. Among other things, the company reported that its inventory had increased by nearly $1.1 billion over the prior quarter, and that the company was “overweight” in certain product categories, which caused the company to have to markdown certain inventory to make room for faster growing categories. As a result, the company’s revenue and gross margin declined for the quarter; the company reported that it expected the excess inventory to negatively affect its earnings for the next quarter, as well. According to the complaint, the company’s share price declined nearly 25% on this news.

The Lawsuit

On March 29, 2023, a plaintiff shareholder filed a securities class action lawsuit in the District of Minnesota against Target Corporation and certain of its executives. The complaint purports to be filed o behalf of investors who purchased the company’s securities between August 18, 2021 and May 17, 2022.

The complaint alleges that during the class period the company’s share price was “artificially inflated by Defendants’ misrepresentations about the Company’s ‘balanced multi-category assortment,” insight into consumer behavior, and ability to respond to shifting trends.” The complaint alleges further that news that Target’s sales growth was lower than expected and that Target was “unable to sustain the more moderate growth the company had anticipated just a few weeks earlier,” the price of the company’s common stock “plummeted as the artificial inflation was removed from the price.”

The complaint alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint seeks to recover damages on behalf of the class.


As I noted at the outset, this case is the latest example of one of the types of pandemic-related securities litigation, involving companies whose fortunes rose at the outset of the pandemic but whose fortunes flagged as the pandemic evolved. The prototypical example of this fact-pattern and type of claim involves the exercise equipment company Peloton. Another example is the home improvement products company Stanley Black & Decker, which, as noted here, was hit with a securities lawsuit last week based on an alleged fact pattern that is not too dissimilar than the one alleged against Target in this lawsuit.

In my estimation, this new lawsuit against Target counts as “pandemic-related” and should be counted as such, even though the complaint never mentions the words “COVID-19” or “coronavirus.” The complaint does expressly allege that the company’s inventory overhang was the result of “pandemic-related factors.” Assuming for the sake of argument that this new lawsuit appropriately should be tallied as a pandemic-related lawsuit, it represents the fifth pandemic-related lawsuit to be filed so far this year and the 66th overall since the initial COVID-19 outbreak in the U.S. in March 2020.

One question I had in my mind while reading the complaint is whether or not this new lawsuit also counts as supply chain-related (supply chain issues being one of several macroeconomic factors that has contributed to securities litigation filings in recent months). However, while supply chain issues at the company’s suppliers and vendors did contribute to the inventory constraints the company experienced in 2020, what the complaint is really about is the company’s decision to order larger upfront quantities of inventory in advance in order to ensure that shelves were stocked. So it seems to me that this is an inventory management lawsuit more than a supply chain lawsuit.

One interesting feature of this lawsuit is that it relates to bad news the company released nearly a year ago. This new lawsuit is only one of several lawsuits to be filed recently that involved long-prior events and class periods that ended nearly a year or more before the complaints were first filed. For example, the Stanley Black & Decker lawsuit I blogged about earlier this week also involved disclosures and a class period end date more than a year before the complaint was filed. Similarly, the lawsuit filed last month against the coffee store chain Dutch Bros (discussed here) also involved disclosures and a class period end date nearly a year before the date the first complaint was filed.

There was a time several years ago when the fact that there was a significant time lag between the alleged corrective disclosures and the filing of the initial securities class action complaint was a subject of significant comment. The lag time issue become most evident in the 2017-2019 time frame, a time period in which plaintiffs’ lawyers were filing almost unprecedented numbers of securities suits. Observers speculated that the apparent lag was due to the fact that the plaintiffs’ lawyers were simply falling behind on their filings as they shoved more cases into the pipeline. More recently, the phenomenon of a lag between the corrective disclosure and the filing of the complaint largely went away (and perhaps not coincidentally the number of filings declined as well). It is hard to know what might be causing the sudden uptick in the number of “lag time” case filings. It will be interesting to see whether the phenomenon will continue and to try to discern what might be causing it.

One final note. While this complaint has only just been filed and it remains to be seen how it will face, I will say that when the time comes for the sufficiency of the plaintiff’s allegations to be tested, the court is going to have to look long and hard to find anything in this complaint that even arguably satisfies the scienter pleading requirements.