Target to do more with less

Roughly 600 people lost their jobs at Target’s Minneapolis headquarters on Monday and the company said it would suspend hiring for 400 open positions. The move affects 9% of the employees at the retailer’s headquarters. Another 500 people were let go in Little Rock, Ark. as Target plans to close a distribution center there.

“We are clearly operating in an unprecedented economic environment that requires us to make some extremely difficult decisions to ensure Target remains competitive over the long-term,” said Target president and CEO Gregg Steinhafel.

The elimination of jobs was a last resort for the company, which has undertaken other actions during the past year to manage expenses in the face of reduced consumer spending. Salary increases were suspended from senior management and share repurchase activity was halted. The company also tightened credit card underwriting and credit granting, implemented initiatives to improve store productivity, reducing planned new store openings and cut outside contractor support, travel, entertainment and other headquarters operating expenses.  

Employees who lost their jobs will receive pay for two more months, until April 1, and after that they will receive a comprehensive separation package based on their years of service. As part of that package, Target also will provide these employees with 12 months of continued Target health care benefits in addition to 12 months of COBRA benefits, and outplacement support to assist them in transitioning to their next position. Little Rock distribution center employees will be offered positions at other Target distribution centers, or will receive comparable severance.

These actions come at a short-term price to shareholders of 3 cents a share charge, the majority of which will occur during the fourth quarter. The company believes the annualized benefit resulting from these actions will exceed the charge.

Target operates 1,682 stores in 48 states, 34 distribution centers and employs approximately 350,000 people worldwide. The company is scheduled to report fourth quarter results on Feb. 24.