Discount retailer Target Corp. said Tuesday that it will cut 9 percent of its headquarters staff, close a distribution center and reduce planned new-store openings as it battles the weak economy.
The staff cut includes 600 employees and 400 open positions, mostly in the Twin Cities area of Minnesota where it is based. The company plans to close its Little Rock, Ark. distribution center, which employs another 500 people, later this year.
“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,” Gregg Steinhafel, president and chief executive, said in a press release.
Other cuts include a salary freeze for senior management, stopping share repurchases, tightening consumer credit-card underwriting and credit granting, improving store productivity and reducing planned store openings.
The changes will cost about 3 cents per share and be recorded mainly in Target’s fiscal fourth quarter, which began Nov. 2.
Like most retailers, the Minneapolis-based company has suffered as consumers limit spending and shop mainly for necessities.
Discounters in general have fared better than specialty retailers, but Target has fared worse than its chief rival, Wal-Mart Stores Inc., because more than 40 percent of Target’s revenue comes from nonessentials such as fashions and housewares.
Retail consultant Burt Flickinger III said the move was not entirely unexpected because Target’s same-store sales have been “uncharacteristically soft.”
“Retailers tend to be the biggest hirers when the economy is good, and when the economy is contracting retailers tend to lay off the highest number of people,” he said. “As we’re expecting consumer spending overall to decline 3 to 4 percent during the calendar year, retailers will have to continue to cut back both at corporate offices and the store level.”
The company’s sales in stores open at least one year, a key retail metric known as same-store sales, fell 4.1 percent in December. While that was a smaller drop than analysts were expecting, the company said January same-store sales would continue to reflect the difficult consumer environment and would decline in the mid-single digits.
As the recession stretches on, many companies have announced significant layoffs, including several this week. On Monday, drugmaker Pfizer Inc., wireless provider Sprint Nextel Corp., home-improvement retailer Home Depot Inc., and automaker General Motors Corp. each said they were cutting thousands of jobs.
IBM Corp. acknowledged Tuesday that it is laying off workers at plants across the United States this week, but the numbers are uncertain.