Dive Brief:
- As part of a larger shift to Target’s global headquarters structure, the retailer will lay off about 1,000 corporate staff and close 800 open roles, per details the company shared with sister site Retail Dive. This represents about 8% of its global headquarters workforce, and specifics about those impacted will be shared with employees on Tuesday.
- No store or supply chain roles are part of the cuts, a company spokesperson said. Leader-based positions will be impacted at a rate three times the rate of individual contributors.
- Impacted employees will receive pay and benefits until Jan. 3 in addition to severance packages. Many corporate Target employees are being asked to work from home next week in relation to the news.
Dive Insight:
Target is hopeful this change will reduce corporate complexity, noting that the actions are not being taken to save on costs.
“This spring, we launched our enterprise acceleration efforts with a clear ambition: to move faster and simplify how we work to drive Target’s next chapter of growth,” Target COO and incoming CEO Michael Fiddelke said in a note to employees Thursday. “The truth is, the complexity we’ve created over time has been holding us back. Too many layers and overlapping work have slowed decisions, making it harder to bring ideas to life ... [I]t's a necessary step in building the future of Target and enabling the progress and growth we all want to see.”
A necessary move it is, according to industry analysts.
The decision to cut about 8% of corporate roles is viewed by Jefferies analysts as painful, but needed due to a pattern of weak sales.
“The move signals incoming CEO Michael Fiddelke is willing to act decisively, easing fears of a status quo approach and laying groundwork for a potential turnaround despite near-term headwinds,” the analysts said in a Thursday note shared with Retail Dive. “We view it as a constructive signal for long-term investors, though evidence of top-line recovery will be key before sentiment improves.”
Others are not so sure about how well this plays into the CEO switch-up Target announced in August.
"While there is some truth in Target’s assertion that its job cuts are a consequence of simplification, they are also the result of a business that has been underperforming for a long time and has been operationally weak," GlobalData Managing Director Neil Saunders said in emailed comments.
The mass retailer, following a period of sales declines and consumer backlash, announced Fiddelke — a longtime Target employee — would take over the CEO position from Brian Cornell in February. Cornell will then serve as executive chair of Target’s board of directors for an undisclosed period of time.
The shift was a blow to some in the industry who had hoped the company would hire externally for Cornell’s successor. This was compounded by the idea that Cornell would remain at the company in some manner.
“As would be expected, the job cuts will dampen morale at a company where the mood is already somber,” Saunders said. “That, in turn, will raise a question in many minds: why does the CEO who presided over the mess Target is now in get elevated to the position of Chairman, when so many others will lose their roles?”
