Target steps up investment in store staffing, cuts about 500 other roles

Target said Monday that it’s stepping up store staffing, but eliminating about 500 jobs at distribution centers and regional offices as it tries to win back shoppers who have complained about sloppier shelves, out-of-stock items and longer checkout lines.

In an internal employee memo obtained by CNBC, the big-box retailer said it’s making changes to the way it runs and oversees stores to improve the customer experience, a top goal of new CEO Michael Fiddelke.

To do that, Target said it will reduce the number of store districts — the geographic areas that its nearly 2,000 stores are broken into, which have dedicated staffing — and put money toward more hours for front-line store employees.

As part of the changes, Target is laying off around 500 people, including about 100 at the store district level and about 400 across its supply chain sites, the internal email said.

“This change also fuels our ability to put significantly more payroll in our stores — primarily in additional labor and hours where needed most, but also in new guest experience training for every team member at every store,” the email said.

The email was written by Adrienne Costanzo, chief stores officer, and Gretchen McCarthy, chief supply chain and logistics officer, and sent to Target employees across its headquarters and store field teams on Monday afternoon.

A Target spokesperson declined to specify the amount of additional investment planned for Target stores, but said the announcement will not change starting wages for store workers, which range from $15 to $24 per hour depending on the location.

In a news release on Tuesday, Target also announced several leadership changes. Cara Sylvester, chief guest experience officer, will become Target’s chief merchandising officer, and Lisa Roath, who is chief merchandising officer of food, essentials and beauty, will succeed Fiddelke as chief operating officer.

Rick Gomez, chief commercial officer and a more than decade-long Target veteran, will leave the company. Jill Sando, chief merchandising officer for apparel and accessories, home and Fun101, will retire.

Target also affirmed its outlook for fourth-quarter sales and full-year earnings for the fiscal year that ended Jan. 31. The company said in November that it expected sales to decline by a low single-digit percentage in the fourth quarter and expected full-year adjusted earnings per share to range between $7 and $8. In the previous fiscal year, Target reported adjusted earnings per share of $8.86.

For Target, the announcements represent some of the first organizational changes under Fiddelke, formerly the company’s chief financial officer and chief operating officer, who stepped into the top job on Feb. 1.

Fiddelke took the helm as the company aims to get back to growth. Its annual sales have been roughly flat for four years, and it cut 1,800 corporate roles last year in its first major layoff in a decade.

Customers, vendors and investors say the company had gotten weaker in some of the key areas where it used to stand out. For example, some shoppers said Target had lost its edge with attentive customer service and trendy, fashion-forward merchandise that earned the company its “Tarzhay” nickname.

The company has also faced backlash and boycotts from customers over a string of political and social stances over the past few years, including its decision to sell and then pull some Pride Month merchandise, its embrace of and reversal of major diversity, equity and inclusion initiatives and, most recently, for not speaking out against the surge of immigration enforcement in its hometown of Minneapolis.

Along with Target’s self-inflicted struggles, the company has faced stiffer competition from peers like Walmart and a tougher economic backdrop. Consumers have been more selective in recent years about discretionary purchases and impulse items — Target’s sweet spot — while paying more for necessities like groceries and rent.

In an interview with CNBC at Target’s Minneapolis headquarters in October, Fiddelke said his leading priorities as CEO would be restoring Target’s reputation for style and design, providing a more consistent customer experience and using technology to speed along the business.

Yet he added that Target needs to simplify an operation that’s become more complicated for store managers and store employees in recent years as they not only stock shelves, but also pick orders for curbside pickup or packing cardboard boxes headed to customers’ homes.

“If you’re a store manager now, yes, you’re supporting your in-store guest, and you’re also running a fulfillment business that’s gotten pretty big,” he said in the October interview. “And I think we’re just now fully appreciating, ‘All right, we’ve got to make sure that we’re doing both really well, and it’s more complex than it used to be.'”

Last year, the company made another store-related change to try to clean up and smooth over its operations. Almost all of Target’s online orders are fulfilled in stores, which has taken up more of employees’ time and stores’ back rooms. In response, the company shook up its online strategy, designating some stores as locations where employees pick and pack online orders to ship to customers’ homes and dropping that altogether at other locations.

Target is expected to share more details about its turnaround strategy, along with its holiday-quarter results and full-year forecast, on March 3. It will host an event for investors at its Minneapolis headquarters.