Target to Cut Thousands of Jobs as It Seeks to Trim Costs by $2 Billion
U.S. retailer Target Corp, which has been battling back after a massive data breach and sluggish performance, on Tuesday said it will eliminate several thousand jobs, mainly from headquarters locations in the United States and India, as it aims to cut $2 billion in costs over two years.
The cost-cutting forms a key plank of a revival plan outlined by Chief Executive Officer Brian Cornell, who has sought to narrow the retailer's focus to a handful of product lines where Target believes it has an edge on quality and price while also investing to catch up with rivals online.
Cornell said Target's management needs streamlining and he wants to change the corporate culture from one focused on process to one that meets the demand of customers. Target said it was revamping its merchandise, in part to attract both millenials and Hispanics, seen as important to driving future sales growth.
"We know that to compete today speed and simplicity are critically important," Cornell told a meeting of analysts in New York. "Executing on this plan will translate to growth."
Target said the job cuts would primarily come from corporate locations in the Minneapolis area and in India that collectively employ about 26,000 people, and not from its roughly 1,800 stores across the United States.
Target also said it would invest $1 billion in technology and to upgrade its supply chain. It expects profit margin, as measured by earnings before interest, tax, depreciation and amortization, to hold steady at between 9.5 percent to 10 percent over the next five years, from 9.5 percent last year.
Target's shares closed up 32 cents, or 0.4 percent, at $78.00, after initially falling 2.2 percent after the company gave its outlook on Tuesday.
Cornell, a former Wal-Mart Stores Inc and PepsiCo executive, has moved quickly since taking the helm in August in the wake of a massive breach of customer data in late 2013 that cost former CEO Gregg Steinhafel his job.
His biggest decision to date, announced in January, was to pull out of the Canadian market, swallowing a $5.4 million loss.
Cornel also halved the threshold on free shipping, undercutting Wal-Mart and others in the war for online customers, and is focusing investment on a handful of "signature" categories, including apparel, home goods and beauty products. On Tuesday Cornell outlined plans to improving Target's offering of organic and other food offerings to boost its grocery business, which accounts for one-fifth of overall sales.
For the current fiscal year ending January 2016, the company said it expected adjusted earnings per share, which excludes data breach costs and other expenses, of between $4.45 and $4.65, compared with the $4.27 per share it earned last year and the market consensus for $4.51, according to Thomson Reuters I/B/E/S.
It projected comparable sales growth of 1.5 to 2.5 percent this fiscal year and total sales growth of 2 to 3 percent.
Some of the growth will come from smaller-sized stores. Of the 15 new stores Target plans to open this year, eight will be a convenience store format called Target Express, highlighting its push to capture demand in urban centers.
The company also said it had the capacity to buy back up to $2 billion worth of its own shares this fiscal year, and looks to repurchase $3 billion annually from the following year and beyond.
(Reporting by Nathan Layne; Editing by Lisa Von Ahn, Lisa Shumaker and Leslie Adler)