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Target plans $2 billion in cost cuts in transformation strategy

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MINNEAPOLIS — Target Corp. has unveiled a turnaround plan based on streamlining its headquarters operations to cut costs, boosting its information technology and supply chain investments, and adjusting its merchandise mix to strengthen its relationship with its most loyal consumers.

Target Express Minneapolis

The discount store giant aims to open eight Target Express outlets this year.

The discount store chain’s growth plans, announced late Tuesday following an event for the investor community, also call for the creation of a seamless omnichannel shopping experience and to expand its store base modestly, with an emphasis on its smaller store formats.

“While we’re in the early days and there’s no doubt that transformation can be challenging, we’re taking the steps necessary to unleash the potential of this incredible brand,” said Target chairman and chief executive officer Brian Cornell. “I’m encouraged by our early momentum, and am confident that by implementing our strategy, simplifying how we work and practicing financial discipline, we will ignite Target’s innovative spirit and deliver sustained growth.”

Target’s estimated capital expenditure budget for 2015 is $2.1 billion, which is comparable to its spending in 2010. But while new stores and remodels accounted for roughly three-quarters of 2010 capital spending, they will only represent about one-third of this year’s budget. Nearly half — about $1 billion — of capital spending in 2015 will be devoted to improving Target’s information technology and supply chain capabilities.

Target also plans to cut costs by about $2 billion over the next two years. Those efforts will involve job cuts at the company’s Minneapolis headquarters, as well as process improvements and other efficiencies, the company says.

Target’s merchandising efforts will involve prioritizing certain key categories — Style, Baby, Kids and Wellness — that account for more than a quarter of its sales. Other categories, including grocery, are being repositioned to “deliver a more compelling and appealing shopping experience,” according to the company.

The company’s store opening plans for 2015 are focused on its smaller formats. Target intends to open eight TargetExpress outlets this year, for example. Together with another CityTarget, those outlets will account for about half of this year’s store openings.

Target expects its sales to grow by 2% to 3% this year, with comparable sales increasing by 1.5% to 2.5%.


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