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

Aim It said Monday it is increasing store staff but eliminating about 500 jobs at distribution centers and regional offices as it tries to win back customers who complained about sloppier shelves, out-of-stock items and longer checkout lines.

In an internal employee memo obtained by CNBC, the major retailer said it was making changes to the way it manages and supervises stores to improve customer experience, one of the top goals of the company’s new CEO, Michael Fiddelke.

To achieve this, Target said it will reduce the number of store territories (geographic areas with dedicated staff where it has about 2,000 stores) and allocate more hours to front-line store employees.

As part of the changes, Target will lay off about 500 people, including about 100 at the store location level and about 400 at supply chain sites, the internal email said.

“This change also increases our ability to put significantly more payroll into our stores – additional labor and hours where they are needed most, as well as new guest experience training for every team member in every store,” the email said.

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

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

The organizational change for Target is one of the first under Fiddelke, the company’s former chief financial officer and chief operating officer, who stepped into the top job on Feb. 1.

Fiddelke took over as the company aims to return to growth. Its annual sales have been more or less flat for four years, and last year it cut 1,800 corporate positions in the first major layoffs in a decade.

Customers, vendors and investors say the company is weakening in some key areas where it used to excel. For example, some shoppers said Target lost its edge with attentive customer service and trendy, trendy products that earned the company the nickname “Tarzhay.”

The company has also faced backlash and boycotts from customers over the past few years for a number of political and social stances, including its decision to sell and then pull some Pride Month products, its embrace and reversal of major diversity, equity and inclusion initiatives and, most recently, its failure to speak out against an increase in immigration enforcement in its hometown of Minneapolis.

Aside from Target’s own struggles, the company has also faced stiffer competition from its peers Walmart and a more challenging economic environment. While consumers have become more selective about discretionary purchases and target products (Target’s sore spot) in recent years, they are paying more for necessities like food and rent.

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

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

“If you’re a store manager right now, yes, you’re supporting your guest in the store and you’re also running a fulfillment business that’s growing quite a bit,” he said in the October interview. “And I think we fully appreciate that now: ‘Okay, we’ve got to make sure we’re both really okay, and this is more complicated than it was before.'”

Last year, the company made another change to the store to streamline and streamline its operations. Nearly all of Target’s online orders are fulfilled in stores, which takes up more of employees’ time and stores’ backrooms. In response, the company shifted its online strategy by designating some stores as places where employees would pick, package and ship online orders to customers’ homes, leaving it to other locations entirely.

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