Target is closing 1,800 positions: Is it a growth strategy?

Target is closing 1,800 positions to cope with ongoing sales declines. The company's new CEO, Michael Fiddelke, will take over in February.

In a note sent to employees on Thursday, Fiddelke stated that the company will close 8% of its corporate positions in the U.S. This includes closing the current 1,000 positions and 800 open positions. Reports indicate that the layoffs will not affect logistics or store personnel.

In the note, Fiddelke said, "Our aim is clear: to drive growth for Target." He also added, "Today, we are taking a significant step toward strengthening our retail leadership in style and design, enhancing the guest experience, and leveraging technology to support our growth."

Assessments have been made that the layoffs will impact leaders, who affect individual participants three times more, indicating the company's focus on restructuring its management. Affected employees will be informed on Tuesday.

Following the news, Target's shares remained unchanged on Friday. This year, the shares have decreased by approximately 30%.

The cuts are being made during a period of declining sales, with same-store sales reported to have fallen 1.9% in the latest quarter, and a projected loss of 3.8% in the first quarter of 2025. Current CEO Brian Cornell will transition to the executive chairman role early next year.

These cuts are occurring at a time when other companies such as Starbucks (SBUX), Ford (F), Meta (META), and Rivian (RIVN) have also announced layoffs.

Analysts indicated that this step for Target is necessary and demonstrates Fiddelke's urgency in turning the company around. CFRA analyst Arun Sundaram said, "This move helps alleviate investor concerns regarding Michael Fiddelke's ability to drive change."

Sundaram also noted, "Fiddelke shows a willingness to take decisive and potentially disruptive actions as he begins his role."

Mizuho analyst David Bellinger expressed expectation for "more restructuring activities" in the coming months. Bellinger stated that further cuts could provide "reinvestment opportunities for a struggling but potentially salvageable business."

Target's shares have fallen more than 30% since the beginning of the year due to consumers tightening discretionary spending, a boycott this year, and loss of market share to low-cost competitors like Walmart (WMT).

However, Bellinger noted that Target still has "strong private labels, an expanding market model, and newly released special products related to the Taylor Swift album."