Target to cut thousands of jobs in $2 billion restructuring

New York -- Target Corp. plans to cut “several thousand” jobs, mainly at headquarters, during the next two years and invest $1 billion in technology and supply chain in 2015 as part of an ambitious and wide-reaching plan to transform its business for a digital age. (Target expects to invest between $2 and $2.2 billion in total capital expenditures in 2015.)

In addition, the retailer plans to make its stores more personalized to local demographics, focus on four signature categories, revamp its food offerings, expand in urban areas, and encourage shopping across both online and offline channels. The changes were outlined by Target chairman and CEO Brian Cornell at an investor meeting in New York. Cornell has been working to get the retailer back on track since being appointed chief executive in late summer. His early efforts have begun to bear fruit as Target's sales and traffic have been on the upswing, and the company reported a stronger-than-expected rise in sales and profit in the fourth quarter, with a 3.8% increase in same-store sales.



“Following a thorough, strategic review of our business, coupled with a careful evaluation of the changing retail landscape, we have identified the key initiatives that will put Target on a clear path to growth,” said Brian Cornell, chairman and CEO, Target.



The retailer said that cost savings of $2 billion over the next two years will fuel Target’s growth and drive profitability. The savings will come through operations, technology and process improvements; supply chain and sourcing efficiencies; and corporate restructuring. The restructuring will be concentrated at Target’s Minneapolis headquarters, and includes the establishment of centralized teams based on specialized expertise and the elimination of several thousand positions over the next two years.



“While we’re in the early days and there’s no doubt that transformation can be challenging, we’re taking the steps necessary to unleash the potential of this incredible brand,” said Cornell. “I’m encouraged by our early momentum, and am confident that by implementing our strategy, simplifying how we work, and practicing financial discipline, we will ignite Target’s innovative spirit and deliver sustained growth.”



Target said it expects digital sales to increase 40% and same-store sales between 1.5% and 2.5% in 2015. For the chain’s fourth quarter results, click here (link to am story)



Target said it differentiation in the marketplace will be driven by stronger merchandising authority and a shopping experience centered on ease and inspiration, with mobile serving as the front door to all of Target.



In addition, Target said it will create a headquarters team that is more agile, efficient and guest-focused.



Target’s transformation includes the following focus areas:



• The retailer is taking a channel-agnostic approach to growing its business, driving a total Target experience across stores, online and mobile. Customers who shop Target in stores and online generate three times the sales compared to guests who shop in stores only. To appeal to these shoppers, the retailer will undertake continued enhancements in technology, supply chain and inventory management will create a shopping experience that is rooted in ease and inspiration



• Target will invest in four signature merchandise areas — Style, Baby, Kids and Wellness — to emphasize focus on newness and differentiation. In 2014, these four categories accounted for more than a quarter of Target’s sales. Other categories, including grocery, are being repositioned to deliver a more compelling and appealing shopping experience.



• Target will tailor its assortments and offer more locally relevant products, with demographics, climate, location and other shopper-led factors driving merchandising decisions.



Additionally, the chain will strengthen its data and analytics and technology capabilities to deliver more personalized digital experiences, loyalty programs and promotional offers.



• Target’s store expansion will increasingly focus on new, more flexible formats like TargetExpress and CityTarget, which target rapidly-growing, dense urban areas. In 2015, the retailer will open eight TargetExpress locations across the country. It also will continue test new layouts in its general merchandise stores.