Will Layoffs Be Part Of Target’s Cost-Cutting Strategy?
Amid positive sales news for Target Corporation on Wednesday were hints of potential additional job cuts in the future.
The Minneapolis-based retailer said its fourth quarter, which ended Jan. 31 and factors in the important holiday shopping season, was the company’s best in two years. Compared with a weak performance for 2013, when a data breach struck the company, Wednesday’s news was much more favorable.
But Fortune and Reuters reported that during an earnings call Wednesday morning, Target’s chief financial officer, John Mulligan, said the company will disclose plans for investments and corresponding cost-cuts at a March 3 investors meeting. Mulligan navigated around questions of whether those cuts could include job losses, saying only that Target “looked across the entire enterprise and think there are many opportunities across the company to reduce costs.”
On Wednesday, the company said its fourth-quarter sales rose 4.1 percent to $21.8 billion from $20.9 billion a year ago, which beat the $21.6 billion expected by analysts polled by Thomson Reuters. Same-store sales for the quarter climbed 3.8 percent, which beat Target’s own forecast of 3 percent that it called for in a conference call with investors last month. Target’s fourth-quarter earnings per share of $1.50 also beat its own guidance of $1.43 to $1.47 per share. It was an increase of nearly 15 percent from $1.31 in 2013.
In a news release, CEO Brian Cornell said the results were driven by better-than-expected sales and strong performances in signature categories of style, baby, kids and wellness.
“We’re seeing early momentum in our efforts to transform Target, and our team is entering the new fiscal year with a singular focus on continuing to differentiate our merchandise assortment and shopping experience while controlling costs by reducing complexity and simplifying the way we work.”
The company posted a loss last quarter of $2.6 billion, or $4.10 a share, compared with a $520 million profit in the last quarter of 2013. For the year, Target’s sales increased 1.9 percent to $72.6 billion from $71.3 billion a year ago. Full-year earnings per share were $4.27, down 2.6 percent from last year.
Target said it expects adjusted earnings per share of $0.95 to $1.05 for its first quarter of 2015 now underway. Analysts polled by Thomson Reuters are meanwhile calling for $1.04 a share. The company will report full-year guidance next week.
Target’s stock price ticked slightly downward but changed little as of Wednesday morning: down about 0.16 percent to $76.83. But its shares are up about 36 percent from 12 months ago.
In ways both reflected in and absent from its 2014 earnings report, the year was as newsworthy as any in Target’s 114-year history. Brian Cornell became its first outside-hire CEO when he replaced the embattled Gregg Steinhafel in July. The company also decided last month to discontinue its failed Target Canada business, which cost the company $5.1 billion and pre-tax losses and will result in the closure of 133 stores and 17,600 jobs lost—hundreds of which are based in the Twin Cities. As a result, Target meanwhile owes Minnesota companies anywhere between $3.8 million and $5 million related to its exit from Canada.
Target is also adjusting the way it does business moving forward, with plans for more smaller format stores than typical big box stores this year and recent news that it slashed to $25 its free shipping threshold for online orders.