Why is Target cutting off over 1000 corporate jobs? Reasons explained by CEO Michael Fiddelke

Target Corporation said it plans to cut about 1,800 corporate jobs to boost growth and make its operations simpler. Incoming CEO Michael Fiddelke shared the plan in a memo sent to employees, marking the retailer's biggest round of layoffs in a decade.

*TARGET CUTS 1,800 CORPORATE JOBS IN ITS FIRST MAJOR LAYOFFS IN A DECADE - CNBC$TGT pic.twitter.com/hl3nlSlMhq

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The company explained that the cuts will involve letting go of about 1,000 employees, while 800 vacant roles will remain unfilled. This change means an overall 8% cut in Target’s corporate workforce.

The retailer confirmed that employees impacted will get individual notifications, and jobs in stores and supply chain areas will not be affected.

Target made this decision while dealing with slower sales and getting ready for a leadership change. On February 1, Michael Fiddelke will become the new CEO, taking over from Brian Cornell, who has led the company for a long time.

Fiddelke has played an important role in the company’s “Enterprise Acceleration Office,” a program started in May that concentrates on technology, quicker decision-making, and exploring new ways to grow.

In a memo to employees, Fiddelke admitted the decision was tough but pointed out the need to fix problems within the company.

“The truth is, the complexity we’ve created over time has been holding us back,” he wrote. “Too many layers and overlapping work have slowed decisions, making it harder to bring ideas to life.”

He added that while the cuts are difficult, they are “a necessary step in building the future of Target and enabling the progress and growth we all want to see.”

Target struggles with sales slump and market challenges amid workforce reductions

The company has dealt with several problems in recent years. These issues include managed inventory, fewer customers visiting stores, and less consumer spending on nonessential products.

Target's sales numbers have stayed the same for four years, and it expects sales to drop this fiscal year.

Unlike Walmart, Target depends more on selling products like clothing, home items, and electronics. This makes it more vulnerable to shifts in the economy and how shoppers feel about spending.

About half of Target's income comes from nonessential goods. In contrast, Walmart earns around 60% of its revenue from groceries and basic necessities.

Target’s stock has not done well in recent years, dropping about 65% since its highest point in 2021. Over the last five years, its stock value went down 41%, while Walmart's climbed 123%.

A spokesperson from the company said workers losing their jobs will keep getting their pay and benefits until January 3 and will also be given severance packages.

The company said it is concentrating on steadying its business and setting itself up to grow in the long run.