Minneapolis — Target has terminated 9 percent of its headquarters workforce and will close a distribution center in Arkansas to cut costs and boost earnings amid the weak sales environment.
The layoffs, announced yesterday, affected about 600 corporate-level employees and eliminated 400 open positions, while the closure of the company’s Little Rock distribution center later this year will result in the loss of 500 jobs.
“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,” president/CEO Gregg Steinhafel said in a statement.
In addition to workforce reductions, the company also suspended salary increases for senior management, reduced new store openings, tightened its credit card policies, and is cutting corporate operating expenses including outside contractor support and travel and entertainment.
Target said it took the actions to bolster earnings squeezed by months of weaker-than-expected sales, and in anticipation of “continued difficult economic conditions well into 2009.”
The announcement coincided with word from fellow Minneapolis-area retail chain Best Buy of an undetermined number of corporate-level layoffs. The downsizing, expected next month, follows a tepid response to an earlier buyout offer.
Target’s affected headquarters employees will continue to receive full pay and benefits through April 1, after which they will receive a comprehensive separation package based on their years of service that includes 12 months of continued health care, Target said. Little Rock employees will be offered positions at other distribution centers or will receive comparable severance.
As a result of the restructuring, Target expects to record a charge of approximately 3 cents per diluted share, mostly in its fiscal 2008 fourth quarter, but expects that the resulting annualized benefit will exceed the charge.