Target Corporation (TGT, Financial) has announced its intentions to layoff thousands of its current employees as a cost-saving plan. Most of the elimination of the "several thousand positions" will take place at the headquarters, located in Minneapolis. The laying off process would gradually take place over a period of two years and is estimated to save around $2 billion. The big box retailer seeks the laying off as a tool to boost its online businesses and sales.
Financials
This news came a week after the company announced the fourth quarter 2014 earnings. Same-store sales showed a positive increase over the quarter. Total U.S. sales witnesses a 1.9% increment. The company reported an EPS of $1.50 last week on revenue of $21.75 billion. Wall Street Journal had predicted the EPS in the same week to be $1.46 on revenue of $21.63 billion. Target recently announced its plans to retreat from the Canadian market citing out-of-business reasons. Hence, the fourth quarter 2014 reported a pretax loss of around $5.1 billion. This resulted in a loss of $5.59 per share. Sales in the fourth quarter showed an upward movement of 4.1% to $21.8 billion. The sales last year in the same quarter was $20.9 billion. Full-year 2014 EBIT was $4,761, a 4% increase as compared to last year.
Lay off activity
Target seeks on laying off positions at its corporate headquarters- where 13,500 people are currently employed along with "eliminating" employees from Bangalore, India. Plans to form centralized teams are also take shape. The retailer will now make the business operations more efficient and will reorganize existing employees – which will include laying off thousands of workers. Though a definite figure has not been provided, the announcement at a meeting with financial analysts and investors has left many employees fuming. All resources will no longer be tied up, rather they will be used for investment purposes in main areas. If all the complexities at Minneapolis are cut off, the company will become more competitive, CEO Cornell said. Target expects adjusted EPS for the year to be between $4.45 to $4.65. For the fiscal year 2015, the estimated sales growth can be anywhere between 1.5% to 2.5%. Target may even look to repurchase up to $2 billion of its shares in 2015 and buy back $3 billion from 2016 onwards.
Management views
CEO Brian Cornell said that Target needs to focus only on a handful of product lines rather than the whole bunch that it is currently dealing in. More focus will be given to these product lines since they have a competitive edge on quality and price. Investment will also be made so as to counter competitors. Hence, in order to attain these objectives, the management team from Target had to be streamlined. Brian said that, rather than focusing completely on one process, the spotlight should be on meeting the demands and needs of the consumers. In order to raise the future sales, Target also plans on giving a new and improved form to its merchandise. The plan of "eliminating thousand of employees" will help in translating growth.
Target, the American retailer is known to be the second largest retailer after Walmart Stores, Inc. (WMT, Financial). Founded in 1902, the company has run through troubled waters in the past. A data breach of the company's systems in late 2013 affected millions of consumers. The recent announcement of closing Canadian stores has left 17,000 employees jobless. Hopefully, Cornell's efforts to make Target an agile and profitable company materializes. The company plans on increasing its focus on flexible formats like CityTarget and TargetExpress. The company's mobile and online presence will hopefully cater to the needs of consumers in the ever-growing urban areas.
