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 the company’s 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 will result in a significant increase in store payrolls, primarily through additional labor and time where it is needed most, but also training on the new guest experience for all team members at each store,” the email states.
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.
The reorganization is one of Target’s first changes under Fidelke, who took over as 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 biggest 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 withdraw some Pride Month products, adopt and rescind major initiatives around diversity, equity, and inclusion, and most recently, not stand up 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’re at the point now where we’re fully aware of, ‘Okay, we’ve got to make sure we’re doing both well, and it’s more complicated than it was before.’
Last year, the company made another round of store-related changes to streamline and streamline operations. Most of Target’s online orders are fulfilled in stores, taking up more of its employees’ time and backroom space. In response, the company made significant changes to its online strategy, designating some stores as locations where employees pick, pack and ship 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.
