Target to cut thousands of jobs in $2bn strategy switch

NEW YORK: Target plans to invest billions of dollars this year, streamlining operations, opening more small stores and creating a product mix designed to appeal to a younger, broader consumer demographic.

The retailer will also cut several thousand jobs in the next two years as part of a cost-savings plan. Most jobs are expected to go at its Minneapolis base, where it employs 13,000.

Chief executive Brian Cornell said the retailer’s business priorities for 2015 were focused on making specific product categories more stylish and encouraging shopping across both digital channels and stores.

Target has been working to enhance itself as a shopping destination after years of missteps that saw the brand lose its edge on fashionable home goods and apparel.

Mr Cornell was brought on last summer after former CEO Gregg Steinhafel left the company in the wake of a 2013 holiday season data breach and trouble at the Canadian division, which Target is closing.

Since then, Mr Cornell has helped Target identify top priorities and drive investment in categories such as style, baby and kids, and wellness, which accounted for more than a quarter of the brand’s sales last year. Those will continue to be the brand’s main merchandising priorities as the retailer invests up to US$2.2 billion this year in an effort to continue growing sales.

About $1 billion of that will go towards technology and supply chain management updates aimed at making shopping easier and faster.

“In the background there’s a lot of technology work to combine what have historically been two separate channels,” said John Mulligan, chief financial officer.

The company also plans to save about $2 billion in the next two years by making its business operations more efficient and reorganising employees at its headquarters in Minneapolis.

“We must make sure we are a simpler organisation,” he said. “We have to be more agile, more nimble.”

One of the company’s top strategies is focusing on its smaller format City Target and Target Express stores, which allow Target to make stores more personalised to specific markets and capture urban consumers, Mr Cornell said.

“The performance of City Targets has been nothing short of phenomenal,” Mr Cornell said.

While Mr Cornell emphasised that food will not be a signature category, it still drives traffic and sales, accounting for more than 20% of store business.

Target has found that customers who shop on multiple channels also spend three times as much as customers who shop only in stores.