Target said Tuesday that it would cut several thousand jobs over two years, mostly at its headquarters in Minneapolis, as it struggles to overcome a string of difficult years.
The company also announced a revamping of its food business, describing grocery aisles more akin to a Whole Foods than a suburban discount chain.
“We'll be much more nimble, much more agile,” Brian Cornell, the chief executive, told a meeting of analysts in New York. He added, “We’re in the very early stages of a shift in our business.”
The coming job cuts follow a period marred by an extensive breach of customer information in 2013, sluggish customer traffic, competition from online retailers and a disappointing expansion into Canada.
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But Cornell, who joined the retailer in August, is taking some of the bold steps analysts say are necessary to get Target back on track. In January, he announced that the company would close its 133 stores in Canada and place its entire Canadian operation under bankruptcy protection. About 17,600 people lost their jobs in that failed expansion, which has resulted in more than $2 billion in net losses since 2011.
The fresh job cuts at home are part of an effort to save $2 billion over the next two years, from a combination of corporate restructuring at its headquarters, leaner supply chains and more efficient product sourcing, Target said in a statement. The company will set up centralized teams at its headquarters that will tackle specific areas of the business, like analyzing shopper data. And it will reinvest $2 billion to $2.2 billion in its business, including $1 billion in technology and improvements to the supply chain.
But Target could face mounting labor costs at its 1,795 stores in the United States now that the retail giant Wal-Mart has announced it will raise the pay of 500,000 of its lowest-paid hourly wage workers. Cornell did not commit to the possibility of similar raises at Target, but he said Target wanted to make sure that its hourly pay remained “very competitive.”
For the full year, Target forecast $4.45 to $4.65 a share, in line with analysts’ expectations, and said it expected to see a modest 1 percent growth in comparable sales. It said last week that fourth-quarter earnings per share came to $1.50, beating analysts’ estimates of $1.46 and above the company’s guidance. Fourth-quarter sales in stores open at least a year rose 3.8 percent.
Cornell said the retailer would focus on its fashion, infants’, children’s and health departments to increase sales and customer traffic. As for food, customers can expect to see more natural products, he said - more organic and gluten-free fare, along with specialty yogurt, granola, coffee and tea, and wine and craft beer. The company also plans to make its ingredient labeling clearer and simpler.
As Target’s merchandising chief, Kathee Tesija, put it: Food has not been why shoppers come to Target - and “that has to change.”
The retailer will experiment with reshaping its food section this year, Target said, and will start introducing those changes at its stores countrywide next year.
Target is also investing in its online business, which analysts said once trailed its competitors but is now contributing to sales. The company is making a big push into e-commerce sales, recently halving its threshold for free deliveries, to $25, something analysts said could win market share but eat away at profit margins. (Some of Target’s other digital ideas are surprisingly low-tech: It recently started adding smartphone holders to its shopping carts, so shoppers can navigate Target’s mobile app and use its red carts at the same time.)
Target expects to open a modest number of new stores this year in 15 new locations. Eight will be smaller stores in cities, the company said. The smaller urban stores, which Target first opened in 2012, are twice as profitable as its full-size stores, executives said. In 2014, sales at Target’s smaller Express and City stores open for over a year increased almost 9 percent.
According to Target’s website, there are 16 store locations in the Charlotte metropolitan area.
Observer reporter Katherine Peralta contributed.