Joining grim list in retail retreat, Target to cut HQ workforce by 9%
MINNEAPOLIS Joining a grim and growing list of retailers announcing big cutbacks in staff, Target Corp. said Tuesday it will reduce its headquarters workforce by some 600 employees and eliminate another 400 open positions, mostly in the Twin Cities region.
In addition, Target said it would close its Little Rock, Ark. distribution center, which currently employs 500 people, later this year.
Headquarters employees affected by the cutbacks will continue to receive their full pay and benefits through April 1, Target revealed, “after which they will receive a comprehensive separation package based on their years of service.” As part of that package, Target also will provide these employees with 12 months of continued Target health care benefits in addition to 12 months COBRA benefit, and outplacement support to assist them in transitioning to their next position. Little Rock distribution center employees will be offered positions at other Target distribution centers, or will receive comparable severance.
The cuts come in the wake of weaker-than-expected sales, which Target acknowledges are pressuring earnings performance. “Combined with the outlook for continued difficult economic conditions well into 2009, the company is taking a more conservative approach to business planning,” noted the big upscale discounter.
The staff reductions underscore the severity of the economic downturn, and are in line with other big moves Target has made recently “to manage expense and capital investment and minimize the number of affected employees.” Among other actions, the nation’s second-largest discount mass merchandise chain — and its 11th largest pharmacy retailer — has also suspended salary increases for senior management and share repurchase activity, tightened its credit card underwriting and credit granting, launched new initiatives to improve store productivity, cut planned new store openings, and attacked other headquarters operating expenses.
“We are clearly operating in an unprecedented economic environment that requires us to make some extremely difficult decisions to ensure Target remains competitive over the long-term,” said Gregg Steinhafel, Target president and CEO.
Target predicts the cutbacks will result in a charge of approximately 3 cents per diluted share, the majority of which will occur in the company's 2008 fourth quarter. Longer term, however, the company said the fiscal benefits of its actions “will exceed the charge.”
Target operates 1,682 stores in 48 states and 34 distribution centers, and employs approximately 350,000 people worldwide.