Target to cut thousands of jobs
Target Corp. over the next two years will cut several thousand jobs at its headquarters in Minneapolis, as it pours the savings into digital initiatives executives believe will meet the changing habits of shoppers.
Company executives were expected to use a meeting with investors and analysts Tuesday to announce job cuts. The scale of the move, along with its focus on the headquarters, was a surprise. Target aims to produce $2 billion in annual savings.
“It’s a time for significant change and transformation for Target,” Brian Cornell, Target’s chief executive, told the investment audience.
It’s the second major step by Cornell, who joined Target last August, to shore up the nation’s fourth-largest retailer, which has endured slow growth and several strategic missteps since the 2008 recession. In January, Cornell ended the company’s expansion to Canada that began two years ago and produced $2 billion in losses.
Target, which has about 350,000 employees globally, has 13,000 at corporate offices in the Minneapolis area.
The precise number of jobs that will be eliminated in the Twin Cities wasn’t clear. In a statement, Target said the cuts “will be concentrated at Target’s headquarters locations and focus on driving leaner, more efficient capabilities, removing the complexity and allowing the organization to move with greater speed and agility.”
Target last month said that it would eliminate about 550 jobs of people in the Twin Cities who were supporting the Canada stores that are being closed.
With Tuesday’s move, Target becomes the third giant Minnesota company to announce a major, though imprecise, downsizing.
General Mills Inc., grappling with changes in food consumption, is cutting the jobs of several hundred of the approximately 5,000 people at its area headquarters. Best Buy Co., the electronics retailer grappling with price pressures and uncertain growth prospects, on Tuesday announced a new phase of a cost-cutting program that previously involved job cuts.
Most other major Minnesota companies are performing solidly and the region’s economy is one of the strongest in the nation.
Even so, the cuts at Target will be the largest ever seen at its headquarters and the effects will ripple throughout the Twin Cities, particularly in downtown Minneapolis, which has been going through a boom period of development. Target cut 600 people at headquarters in 2009 and about 550 last year.
“With all the problems passed along from the prior management, we knew that the cuts would be high, but we did not anticipate that the cuts would be this high,” said Burt Flickinger III, managing director of Strategic Resource Group in New York.
Andrea Christenson, a vice president at the DTZ real estate brokerage in downtown Minneapolis, said restaurants, bars, hair salons and other businesses downtown will be hurt as a result of Target’s cuts. She added, “When I talk to my retail friends, they think it is short term. Target made a misstep, but I don’t think it’s catastrophic. And then they'll grow again.”
At the meeting in New York, Cornell announced a shift from Target’s decades-long focused on its retail outlets, saying the firm would be “agnostic” about whether shoppers bought in its stores or online. Kathee Tesija, the company’s chief merchandiser, said Target’s research showed that about 70 percent of its customers now begin their shopping by looking up products on smartphones and other digital devices.
Cornell also said Target’s “expect more pay less” reputation became “decoupled” as the retailer responded to the recession with an intense focus on cheap prices and products. “I can promise you we will not lose our balance again,” he said.
He and other executives said Target will sharpen four so-called “signature” categories that deliver huge sales and profits: style, baby, kids and wellness.
The firm will also revamp its grocery departments, Cornell said, to provide more fresh food.
The last time Target held a large-scale meeting with investors and analysts was in October 2013. A lot has changed since then. The CEO who resided over that meeting, Gregg Steinhafel was ousted last May and Cornell a few months later became the first outsider hired to lead Target.
In 2011, Steinhafel had laid out a plan for Target to grow sales from $70 billion to $100 billion over five years. But the company formally abandoned the goal last fall. Target’s 2014 revenue was $73 billion.
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This story was originally published March 4, 2015 at 9:46 AM.