By Paul Ziobro
Target Corp. plans to lay off several thousand employees as
Chief Executive Brian Cornell looks to get the retailer back on
track and shoppers back in its stores.
Most of the job cuts will come from Target's Minneapolis
headquarters where it has 13,000 employees, the company said in a
statement. Over the next two years, Target expects to cut costs by
$2 billion to pay for investments in technology, the development of
smaller urban stores as well as upgrades to its selections of food,
apparel and home goods.
"We are in the very early stages of a real shift in our
business," Mr. Cornell told at a gathering of investors in New
York. Target is looking to eliminate layers of management to
expedite decision-making to speed up the CEO's turnaround
plans.
A little more than six months into his role, Mr. Cornell has
sought to return the retailer to its cheap-chic roots after the
company became overly focused on prices and lost its fashion focus
under his predecessor. Target has begun to show signs of life in
the time since Mr. Cornell came aboard, with sales and customer
traffic starting to recover. Target's sales for the key holiday
period rose 3.8%, the highest level in nearly three years, driven
primarily by more shoppers coming into stores.
The sharp growth partly reflected how poorly Target performed in
the prior year, when a 2013 data breach right before the holiday
season kept shoppers far away from the retailer. Even with this
holiday season's rebound, Target still attracted fewer shoppers
than they did two years earlier and relied heavily on
promotions.
Mr. Cornell has pledged to rework Target's grocery offering,
which has failed on its promise to deliver more customers to stores
and get them to splurge on clothes or home décor. Target plans to
make changes in grocery by localizing its offerings and emphasizing
freshness, but most of the changes won't go fully into effect next
year, Mr. Cornell said Tuesday.
The company also is undertaking a comprehensive review of its
assortments of merchandise and brands to try to regain its cachet
among shoppers. "This is not going to be a nibble around the edges
exercise," Target's Chief Merchandising Officer Kathee Tesija said.
"Nothing is sacred. Everything is on the table."
A key question had been how Target would pay for the turnaround,
and the effect it will have on earnings growth. Target's
headquarters had long been viewed as bloated, with too many layers
of management and unnecessary complexity.
Target forecast total sales growth of between 2% and 3% this
year while sales excluding newly opened and closed stores will
increase between 1.5% and 2%. Growth will also skew largely online.
The retailer expect same-store sales to rise just 1% in its
physical stores, while digital sales are projected to jump 40%
after rising 36% last year.
The company also plans to resume share repurchases, and aims to
buy back $2 billion of stock this year, Chief Financial Officer
John Mulligan said, though its dividend payout will slow to between
5% to 10% this year.
Write to Paul Ziobro at Paul.Ziobro@wsj.com
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