target announced Monday that it would cut about 500 jobs at its distribution centers and regional offices in an effort to shore up store staffing levels while winning back shoppers who were unhappy with sloppy shelves, out-of-stock items and long checkout lines.
In an internal employee memo obtained by CNBC, the retail giant said it is changing the way it operates and oversees its stores to improve the customer experience, a top goal of new CEO Michael Fidelke.
To that end, Target said it will use the money to reduce the number of store districts — the geographic areas where the company’s roughly 2,000 stores are concentrated and staffed full-time — and increase the hours of front-line store employees.
As part of the changes, Target will lay off about 500 people, including about 100 at the store district level and about 400 across its supply chain sites, according to an internal email.
“This change allows us to significantly increase our store payroll, primarily by adding additional labor and hours where it’s needed most, as well as training all team members at each store on the new guest experience,” the email said.
The email was written by Adrian Costanzo, Chief Store Officer, and Gretchen McCarthy, Chief Supply Chain and Logistics Officer, and was sent to Target employees in corporate headquarters and on-store field teams on Monday afternoon.
A Target spokesperson declined to say how much additional investment is planned for Target stores, but said starting salaries for store employees, which range from $15 to $24 an hour, depending on location, will not change as a result of the announcement.
In a news release Tuesday, Target also announced several leadership changes. Kara Sylvester, chief guest experience officer, will become Target’s chief merchandising officer, and Lisa Roos, chief merchandising officer for food, essentials and beauty, will replace Fidelke as chief operating officer.
Chief Commercial Officer Rick Gomez, a veteran of more than 10 years at Target, is leaving the company. Jill Sand, chief merchandising officer for apparel and accessories, home and Fun101, is retiring.
Target also confirmed its fourth-quarter sales and full-year profit outlook for the fiscal year ending Jan. 31. The company said in November that it expected fourth-quarter sales to decline by a low single-digit percentage and full-year adjusted earnings per share in the range of $7 to $8. In the last fiscal year, Target reported adjusted earnings per share of $8.86.
For Target, the announcement represents some of the first organizational changes under Fidelke, who took over as the company’s chief financial officer and chief operating officer on February 1.
Mr. Fidelke took the helm with the aim of getting the company back on a growth track. The company’s annual sales have been roughly flat for four years, and last year it cut 1,800 positions in its first major layoff in 10 years.
Customers, vendors and investors say the company has weakened in several key areas where it previously stood out. For example, some shoppers said Target has lost its edge in personalized customer service and trendy, fashion-forward products that earned it the nickname “Tarsay.”
The company has also faced backlash and boycotts from customers over the past few years over a series of political and social stances, including the decision to sell and then discontinue some Pride Month products, adopt and reverse major initiatives around diversity, equity, and inclusion, and most recently, failing to speak out against a surge in immigration enforcement in its hometown of Minneapolis.
In addition to its self-imposed struggles, Target has faced greater competition from its industry peers, including: walmart and a tougher economic background. Consumers have been paying more in recent years for essentials like groceries and rent, while becoming more selective when it comes to discretionary and impulse purchases, which is Target’s sweet spot.
In an interview with CNBC at Target’s headquarters in Minneapolis in October, Fidelke said his top priorities as CEO will be to restore Target’s reputation for style and design, provide a more consistent customer experience and leverage technology to accelerate the business.
But he added that Target needs to simplify tasks that have become more complex for managers and store employees in recent years, as they not only stock shelves but also pick orders for curbside pickup and pack cardboard boxes headed to customers’ homes.
“If you’re a store manager now, you’re supporting customers in the store, and you’re also running a fulfillment business that has grown quite large,” he said in an October interview. “And I think we have a good enough understanding now to say, ‘Okay, we’ve got to make sure we’re doing both really well, and it’s more complicated than it used to be.'”
Last year, the company made another round of store-related changes to streamline and streamline operations. Nearly all of Target’s online orders are fulfilled in stores, taking up more of its employees’ time and backrooms in its stores. In response, the company made significant changes to its online strategy, designating some stores as locations where employees pick, pack and deliver online orders to customers’ homes, and eliminating it entirely in others.
Target is expected to announce details of its turnaround strategy, as well as its holiday quarter results and full-year outlook, on March 3. The company plans to hold an event for investors at its Minneapolis headquarters.
