Biggest cuts since ’09 come as nation’s 2nd-biggest retailer copes with cost pressures, data breach.
Target Corp. laid off 475 employees Wednesday and said it will not fill 700 open positions as the company struggles with stubbornly sluggish sales and fallout from the massive computer security breach that short-circuited its crucial holiday period.
The retailer described the cuts as “worldwide.” It didn’t say how many were at its headquarters in downtown Minneapolis, but sources told the Star Tribune that the majority of the layoffs were there.
“The economy is simply not growing that fast, and retail’s moves are highly correlated to the economy,” said George John, associate dean at the University of Minnesota’s Carlson School of Management. “All these retailers face very challenging business times.”
Target is by far the largest employer downtown and a key driver of its vitality. The company has 11,000 people at its flagship offices on Nicollet Mall and a total of 14,000 corporate employees in Minnesota.
The retailer declined to make an executive available for questions or say whether more layoffs are in the works. The company also wouldn’t say how many of the 700 open positions were based in the Twin Cities.
The layoffs are Target’s largest since January 2009, when the nation’s second-largest retailer said it would cut 1,100 positions from its headquarters.
“We believe these decisions, while difficult, are the right actions as we continue to focus on transforming our business,” the company said in a statement. “We will continue to invest in key business areas to strengthen our ability to compete and thrive well into the future.”
Throughout 2013, Target saw growth in sales and profits dwindle, while its major investment in Canada — 124 stores opening within 12 months — has been disappointing.
“Obviously, they’re struggling,” said Brian Yarbrough, a retail analyst for Edward Jones. “There’s an opportunity to be a little bit more lean.”
In mid-December, the company discovered that it was the victim of a data breach that exposed the financial and personal information of tens of millions of customers. The breach hit the company during the peak of holiday shopping season, and executives said recently that sales turned “meaningfully weaker” after the breach became public Dec. 19.
Target will be dealing with entanglements from the data theft for years, and they could be costly to settle, some analysts say. “What happens next is the story,” John said. “Is this the opening wedge of something significant, or is this just a one-off thing?”
A woman who was laid off from Target’s finance department said half of her 12-person team was fired immediately during a meeting Wednesday morning, while the other half will be laid off next month. The layoffs have been in the works for more than six months, the employee said, and she and her family had been preparing.
“They just sent out a memo saying we had a mandatory meeting at such-and-such time saying that you guys are being let go as of today,” said the woman, who asked not to be identified for fear that her severance could be affected.
Employees who received notice Wednesday will remain on the payroll for at least 45 days, said Target spokeswoman Molly Snyder. They will receive severance packages according to their years of service.
The layoffs are not related to the data breach, Snyder said. But the breach has coincided with other setbacks for Target, Yarbrough noted.
The expansion into Canada — Target’s first push into a foreign market — yielded lower-than-expected returns.
The company’s nine-month profit through Nov. 2 was 29 percent lower than a year earlier despite a 3 percent jump in sales. Following the data breach, Target lowered its outlook for fourth-quarter comparable-store sales to a decline of 2.5 percent, after previously saying it expected no change.
Separately, the retailer said Tuesday it would end its health coverage for part-time store workers. Less than 10 percent of Target’s 361,000 workers participated in the program, the company said.