Target slashes 260 jobs in sign of retail despair

Target cut 260 jobs this morning from its support centre in Geelong and regional support locations.

The job cuts are part of a new organisation structure which the retailer is aiming at rebuilding its business performance.

Of the 217 permanent jobs cut, 144 are in Geelong, 55 are based in Melbourne and 18 interstate.

Target managing director Stuart Machin said in a statement the cuts were necessary to get Target on a sustainable path to growth.

“This is an extremely difficult time for our team and, unfortunately, we’ll be losing many great team members,” Machin said.

“With our sales and profit under-performance over the past 12 months, we have needed to act in order to get our costs under control and the right store support structure in place.”

Employees who have been made redundant will receive their full entitlements and will also be given support and information services, including career transition support.

The cuts follow flat full-year earnings for 2011-12 which prompted Target to dump chief executive Dene Rogers for Machin after only 15 months in the top job at the retailer.

Target’s woes are the product of a difficult retail environment, according to Nomura retail analyst David Cooke.

Cooke told SmartCompany retailers have to combat increasing demands on consumer’s discretionary cash.

“It’s challenging and there is increasing demands on the consumers’ available spend from such things as the increase in the super guarantee levy, the Medicare levy increase impacting certain income earners and the reduction in the health insurance rebate,” he says.

“The Australian consumer over the last couple of years has learnt to buy on discount and prices have been coming down, but as the Australian dollar unwinds it is a question as to whether consumers will be willing to pay higher prices or whether they will decide to buy less frequently. That could mean some retailers may not survive.”

Cooke says Australian retailers also have to deal with increased competition from international retailers who see Australia as a stable and growing market.

“However, costs here are higher including rent, people cost and the currency,” he says.

“Australia is a relatively expensive place to do business.”

Besides these structural problems, Cooke says Target has also had to battle against confusion over its market positioning.

“There is a perception that for Kmart, Big W, Myer and David Jones their position in the market is fairly well understood,” he says.

“Target, historically, has bounced between trying to be a discount department store and more upmarket. It has got to figure out what its niche is and how it is going to play in that niche. Part of that is likely to result in a change of guard within Target.”

Employment and Workplace Relations Minister Bill Shorten said the news from Target this morning was disappointing.

“This is particularly bad news for the 260 affected Target employees, their families and, more broadly, the Geelong community which has received more than its fair share recently,” he said in a statement.