The US retail giant Target announced on Thursday that it is cutting 1,800 corporate jobs, a significant and painful restructuring that marks the company’s first major round of layoffs in a decade.
The move is a clear and decisive signal from the company’s incoming leadership that it is prepared to take drastic measures to get the struggling retailer back on a path to growth after four years of roughly stagnant sales.
The layoffs were announced in a memo sent by Target’s incoming CEO, Michael Fiddelke, to employees at the company’s Minneapolis headquarters.
A necessary step to simplify a complex business
The eliminated roles, which represent an approximately 8% cut to Target’s corporate workforce, are a combination of about 1,000 employee layoffs and the elimination of 800 open positions, a company spokesman told CNBC.
In his memo, Fiddelke stated that the cuts were a difficult but necessary step to simplify the company’s operations and speed up its decision-making.
“The truth is, the complexity we’ve created over time has been holding us back,” he wrote.
Too many layers and overlapping work have slowed decisions, making it harder to bring ideas to life.
He added that while the decision was a difficult one, it was “a necessary step in building the future of Target and enabling the progress and growth we all want to see.”
A new leader takes the helm of a struggling ship
The dramatic cuts come as Target is in the midst of a major leadership transition.
The company announced in August that Fiddelke, its current chief operating officer, would take over as CEO on February 1, succeeding the longtime leader Brian Cornell.
Fiddelke is taking the helm of a company that has been battling a persistent and damaging sales slump, a crisis driven by declining store traffic, inventory troubles, and a series of damaging customer backlashes.
The company has already stated that it expects its annual sales to decline this year, and its shares have plummeted a staggering 65% since their all-time high in late 2021.
A structural disadvantage in a tough market
Target’s business model, which relies more heavily on discretionary, non-essential items than its rivals, has made it particularly vulnerable to the recent shifts in consumer sentiment.
According to estimates from GlobalData Retail, about half of Target’s sales come from these discretionary items, compared to just 40% at its chief rival, Walmart.
This structural disadvantage has led to a sharp divergence in the performance of the two retail giants. While shares of Walmart are up about 123% in the past five years, Target’s have declined by 41% over the same period.
The company has confirmed that no roles in its stores or its supply chain were impacted by the cuts, and that affected employees will receive pay and benefits until January 3, in addition to their severance packages.
For a company that has long been a titan of American retail, the road ahead appears to be a difficult and uncertain one.
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