Target plans to cut about 1800 staff as part of its first major layoff in years, as the retailer works to return to meaningful top-line growth.
The job cuts were announced in a memo sent to employees by incoming CEO Michael Fiddelke, according to multiple reports. These include approximately 1000 employee layoffs and about 800 positions that will no longer be filled.
The move, which affects about 8 per cent of Target’s corporate workforce, marks the first major round of layoffs in a decade for the company.
“While there is some truth in Target’s assertion that its job cuts are a consequence of simplification, they are also the result of a business that has been underperforming for a long time and has been operationally weak,” said Neil Saunders, MD of GlobalData.
“The repeated failure to grow the top line in a meaningful way has eroded profitability, which in turn has left investors very dissatisfied.”
Addressing Target’s ills
Target reported a 0.9 per cent sales decline in the second quarter ended August 2, following a 2.8 per cent drop in the first quarter. Its sales also slid 0.8 per cent in the last fiscal year.
Shrinking sales have also affected the bottom line, with net earnings falling 21 per cent in the second quarter and 7.6 per cent for the first half.
The recent results prompted the company to appoint Fiddelke, who is currently COO, as the new CEO starting February. Fiddelke will succeed Brian Cornell as he transitions to the role of executive chair of the board.
According to Saunders, while cutting corporate jobs may help boost profit, the move alone does not solve all of Target’s ills, especially as investment is also needed on the shop floor to improve the customer experience.
“Leadership has been in seeming denial about many of the challenges and has not been nearly open enough about them with either staff or stakeholders,” he said. “That may change with new leadership, but it is a prerequisite for future success.”
The analyst added that the job cuts will likely “dampen morale at a company where the mood is already somber.”
“That, in turn, will raise a question in many minds: Why does the CEO who presided over the mess Target is now in get elevated to the position of chairman, when so many others will lose their roles?”
