Target Cutting Jobs; Shifting Gears

By Camilo Echeverri Bernal on March 4, 2015

Seeking to narrow Target’s focus to a handful of key product lines and online business, Brian Cornell, Chief Executive Officer will cut $2 billion dollars in jobs over the next two years. Target is shifting gears.

The company did not give details as to how many of its employees will be unemployed, but most are expected to be selected from the Minneapolis base, where there are 13,000 currently employed.

The cut would mostly entail headquarters locations and, according to Cornell this would mean freeing up resources for investments in focus areas.

“Cutting complexity at headquarters will make us more competitive,” Cornell said.

Since Cornell became CEO of Target, he has made it a priority to invest in categories such as style,  baby and kids, and wellness. These were the sectors that accounted for more than a quarter of Target’s sales last year.

Target also expects digital sales to increase 40 percent and same-store sales between 1.5 and 2.5 percent, with modest improvement in gross margins and expense rates.

Aside from this, Cornell aided Target to make online shopping easier by turning 136 stores and making them double as shipping warehouses, cutting down on shipping costs. It is estimated that another 350 stores will also be added to this list.

“In the background there’s a lot of technology work to combine what have historically been two separate channels,” said John Mulligan, chief financial officer, explaining how Target plans to integrate its online and in-store infrastructure.

As it counts for 20 percent of store business, Target is also looking into expanding its food section by offering fresher alternatives from local brands as well as developing a recipe portal for healthier alternatives.

“So we have to get food right to continue to drive more traffic and also to attract new consumers,” Cornell said. At present, Target’s food assortment doesn’t drive store traffic.

“Overall, we lack a clear positioning (on food),” said Kathee Tesija, chief merchandising and supply chain officer. Food isn’t why customers come to Target, and “that has to change,” she said.

Wishing to appeal to Millennial and Hispanic families, two groups that are making up Target’s customer base, they have decided to bolster their mobile apps as well as their digital experience in stores.

In short, Target expects to buy back up to $2 billion of its own shares, and seek to repurchase $3 billion annually from the following year and beyond.

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