On Thursday, October 23, the American retail giant Target announced that it will be laying off 1800 employees. This is the first large-scale layoff the company has seen in the past decade, aiming to get back on the growth track after experiencing four years of stagnant sales.
Target, headquartered in Minneapolis, had its incoming CEO, Michael Fiddelke, announce the layoff news in a memo to headquarters employees.
According to a company spokesperson, the layoffs will include around 1000 employees and about 800 positions that are no longer needed. The memo indicates that the total number of layoffs amounts to about 8% of Target’s total workforce. Affected employees will be notified next Tuesday.
In August, Target appointed its current Chief Operating Officer, former CFO Fiddelke, to succeed current CEO Brian Cornell. Fiddelke is set to take over on February 1st next year.
Target has been struggling to combat declining sales, trying to address issues such as decreasing store traffic and inventory problems. The company has stated that it expects a decrease in sales for this year. Since reaching a historical high at the end of 2021, Target’s stock price has dropped by 65%.
Compared to retail competitors, Target has a smaller proportion of grocery and essential items in its overall sales, making its business more susceptible to economic fluctuations and consumer sentiments. According to estimates from GlobalData Retail, around half of Target’s sales come from non-daily essentials, while Walmart only has 40%.
Walmart’s stock price has risen by approximately 123% in the past five years, while during the same period, Target’s stock price has fallen by 41%.
In the memo sent to company headquarters employees on Thursday, Fiddelke stated that the layoffs would help the company make necessary changes.
“The fact is, the complexity we’ve created over the years has been holding us back,” he wrote in the memo. “Too many layers and overlapping work have slowed decision-making, making it more difficult to put ideas into action.”
He acknowledged that the layoffs are tough but mentioned that they are a necessary step to build Target’s future and achieve progress and growth that everyone hopes to see.
According to a Target spokesperson, the affected employees will receive severance packages in addition to wages and benefits until January 3rd. The spokesperson also mentioned that no positions in Target stores or supply chain were affected by the layoffs. The impact of the layoffs on management is expected to be higher than on regular employees.
(Reference: CNBC)