Target eliminates positions amid weak sales
NEW YORK (Reuters) - Discount retailer TARGET (TGT.NY)Corp said on Tuesday that it will cut roughly 600 jobs at its headquarters, leave another 400 positions unfilled and close a distribution center that employs 500 workers as it contends with weaker-than-expected sales.
Target, which has roughly 350,000 employees, also suspended salary increases for senior management.
"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 Gregg Steinhafel, Target's president and CEO, in a statement.
Target joins an growing list of retailers that are cutting jobs as a deep recession crimps consumers' ability to spend.
On Tuesday, Best Buy Co Inc said it was resorting to involuntary layoffs at its corporate headquarters, while on Monday, Home Depot Inc said it was eliminating 7,000 jobs, or about 2 percent, of its workforce.
Target made a name for itself selling cheap but trendy designer clothes and home decor, though its business has faltered in the U.S. recession as shoppers shift spending in favor of basics, like food and toiletries.
That shift has hurt Target, where discretionary merchandise like clothes and furniture account for roughly 40 percent of sales, and helped larger rival Wal-Mart Stores Inc.
In November, Target reported its fifth consecutive drop in quarterly profit, said it was temporarily suspending nearly all of its share buybacks and cut its 2009 capital spending plan by $1 billion.
Joseph Beaulieu, a retail analyst at Morningstar, said Target needed to be careful to avoid cutting jobs in a way that would hurt the way it operates in its stores.
"A big way they differentiate themselves from other discounters is with the store experience and keeping a neat, clean store with plenty of check-out aisles," he said.
"If they degraded their store experience, that could be an opportunity for Wal-Mart to go after their slightly more affluent customer base."
Wal-Mart has said it is gaining market share amid the recession, including winning business from customers with higher incomes who previously did not shop in its stores.
CONSERVATIVE APPROACH TO 2009
Target said it has experienced weaker-than-expected sales in recent months and is taking a more conservative approach to business planning for 2009.
The retailer said it will close its Little Rock, Arkansas distribution center later this year.
Target said it expects to record a charge of about 3 cents per share, the majority of which will occur in its fiscal fourth quarter.
Target shares closed up 19 cents to $33.34 on the New York Stock Exchange.
(Reporting by Nicole Maestri; Editing by Gary Hill and Carol Bishopric)