Target said it tried to avoid the job cuts. It suspended salary increases for senior management, tried to boost productivity, reduced new store openings and took other actions to try to cut costs. But consumers are really holding on to their wallets tightly these days. As a result, Target's sales are slipping and it doesn't look like sales will rebound soon for them or most other retailers.
Target spokeswoman Lissa Reitz said 600 employees will lose their jobs at Target's headquarters and 400 unfilled headquarters jobs will be left vacant. Meanwhile, Reitz said 500 jobs will be cut at an Arkansas distribution center.
"This is a sad day for us," Reitz said. "It's a tough economic time. And this is certainly not business as usual."
Target will have about 11,000 employees at its corporate headquarters after the job cuts. arget would not say how the cuts are being distributed by department or function.
But one laid off employee said the cuts are falling primarily on the finance, property development and information technology departments. The former employee asked not to be identified, for fear of jeopardizing ongoing connections to the company. The employee said most workers let go were shocked by their layoff and that some had been with Target for more than 20 years.
Affected headquarters employees will continue to receive their full pay and benefits through April 1. Then, they'll get a severance package based on years of service. Target spokeswoman Reitz said terminated workers will also get help with health care.
"We will provide them with an option to continue their Target health care benefits for 12 months at our team-member rate," Reitz said. "And after that, they'll be eligible for an additional 12 months of Cobra. We're providing outplacement support to help them transition to their next position."
In recent months, Target has experienced weaker-than-expected sales. In the critical month of December, for instance, Target's sales at stores open at least a year fell about 4 percent.
"I don't think this is anything unique to what is going on at Target," said Dave Heupel, an analyst with Thrivent Financial for Lutherans. "It is unfortunately the environment we find ourselves in."
Heupel said retailers don't have any choice but to whack costs -- and employees -- when consumers slash their spending.
"You have a consumer that is not spending and that does not bode well when you have a high fixed cost business like retailers do," Heupel said.
A big problem for both Target and Best Buy is their heavy dependence on products that are not must-haves. Consumers can delay buying Best Buy's consumer electronics. A large portion of Target's sales include fashionable apparel, home furnishings and other things people will do without in hard times. By contrast, retail consultant Howard Davidowitz said most of what Wal-Mart sells consists of groceries and other items people find they can't, or won't, give up.
"The problem with a company like target is that 40 percent of their business is discretionary, which is apparel and home." Davidowitz said. "Fifty percent of Wal-Mart's business is food and consumables."
Davidowitz notes consumers are getting more and more hesitant to spend money on things they don't need, not when they're worried about losing their jobs.
"The consumer is totally underwater, " Davidowitz said "With $14 trillion in debt and an $8 trillion negative wealth effect from housing, a 101(k) instead of a 401(k), decimated in the stock market, exploding unemployment, unable to pay their credit card bills."
Davidowitz forecasts there'll be a lot fewer retailers out there by the end of the year and many survivors will have far fewer stores. He's forecasting that some 240,000 stores will close in the U.S. this year.