[CHICAGO] Target is eliminating about 8 per cent of corporate roles in its first major restructuring in years, according to a memo viewed by Bloomberg News, as the retailer seeks to reduce complexity and regain its footing.
The company is cutting 1,800 roles across various teams and seniority levels, according to the memo. The move will include 1,000 layoffs and close out 800 open roles.
Target has been struggling to get out of a rut caused by soft demand and inventory missteps. It also faced a backlash after it stepped away from diversity policies earlier this year.
Target shares rose less than 1 per cent in extended trading in New York. The stock is down more than 30 per cent year-to-date, trailing the 15 per cent advance by the S&P 500 Index.
“The complexity we have created over time has been holding us back,” Michael Fiddelke, chief operating officer and incoming chief executive officer, said in the Thursday (Oct 23) memo to staff. “Too many layers and overlapping work have slowed decisions, making it harder to bring ideas to life.”
While difficult, the changes are a “necessary step” in building the company’s future, he added.
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Target has had smaller reorganisations, but has not had significant companywide cuts since trimming several thousand jobs in 2015.
Leader roles were affected at a higher rate than individual workers, a company spokesperson said, and no roles in stores or the supply chain were impacted. All US employees at headquarters were asked to work from home next week.
Target has reported an extended streak of poor performance and the loss of market share to competitors in recent years. Its business boomed during the pandemic, with shares hitting a record in 2021. Then shoppers started pulling back their spending.
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The Minneapolis-based retailer said in August that company veteran Fiddelke would be its next boss, effective in February, succeeding current chief Brian Cornell. Fiddelke, who started at Target as a summer intern, has said Target needs to focus on merchandising, improving store shopping and using technology more effectively.
The headcount reduction signals a “leaner, more focused” strategy, wrote Bloomberg Intelligence analyst Jennifer Bartashus. The cuts are unlikely to have a material short-term impact on profit, but should result in more streamlined and efficient operations over time, she said in a note.
Target built a following over the years with its limited-time designer partnerships and assortments of affordable, trendy clothes, home goods and other products. Shoppers lined up for hours to get their hands on special edition merchandise, giving it the moniker Tar-zhay. Many raved about walking into the store to buy one thing and leaving with many more.
Such allure has been dimmed recently. Many customers have pointed to long wait lines, empty shelves and less distinctive items. Executives have acknowledged they are not hitting the mark, and that they need to deliver more consistent results.
Getting back on track will not be easy. Shoppers remain selective, with consumer sentiment remaining subdued on concerns around inflation and the job market. Competition is also stiff, with Walmart doubling down on low prices and revamping its fashion business. Other companies, such as Gap, are leaning into designer partnerships, teaming up with brands including Doen and Sandy Liang. BLOOMBERG
