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Target to trim thousands of job over two years in bid to cut costs by $2bln

Last updated: 07:52 04 Mar 2015 EST, First published: 08:52 04 Mar 2015 EST

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Target (NYSE:TGT), the struggling U.S. retailer, said it will eliminate several thousand jobs, as it aims to cut $2 billion in costs over two years.

Most of the job cuts will come from Target’s Minneapolis headquarters where it has 13,000 employees, the company said in a statement late yesterday.

The retailer seeks to be more agile to compete in an increasingly competitive landscape and appeal to shoppers who are buying and researching on their mobile devices.

Chief executive officer Brian Cornell said there was no doubt that the "transformation can be challenging" but the steps were necessary for the firm.

"[I] am confident that by implementing our strategy, simplifying how we work and practising financial discipline, we will ignite Target's innovative spirit and deliver sustained growth," he said in the statement.

Cornell took over as the head of the retailer in August following a massive breach of customer data in 2013 that affected 70 million people and cost the company $17 million.

Target employs about 26,000 workers at corporate locations in Minneapolis and in India, where the job losses are primarily expected to be.

Target also plans to invest between $2 billion and $2.2 billion in capital expenditures for the current fiscal year.

The new focus will help spur Target's online sales growth of 40 percent as well as help fuel a total projected sales growth of 2 to 3 percent this year.

The moves come after Target lost its way during the Great Recession when it aggressively expanded into basic groceries. That helped drive traffic but diluted its cheap chic image. The company was also dragged down by its botched foray into Canada two years ago. And Target was behind other rivals in e-commerce services.

Speaking to a meeting of analysts in New York, Cornell said the restructuring was aimed at freeing up resources for investments in its focus areas.

Target also unveiled forecasts for the fiscal year to January 2016. The company said it expected adjusted earnings per share of between $4.45 and $4.65 for the full year to January 2016, compared with last year's $4.27 and the market consensus for $4.51 according to Capital IQ.

It expected comparable sales growth of 1.5 to 2.5 percent this fiscal year.

The company also said it had the capacity to buy back up to $2 billion worth of its own shares this fiscal year, and look to buy back $3 billion annually from the following year and beyond.

Target also said that it would be raising wages in the stores this year, though nothing outside of the normal wage increases it implements annually. “We will increase wages in 2015, market by market,” Cornell said. “We will make sure we have increases, as we normally do.”

Target expects to open a modest number of new stores this year in 15 new locations. Eight will be smaller stores in cities, the company said. The smaller urban stores, which Target first opened in 2012, are twice as profitable as its full-size stores, the New York Times said, citing executives.

Shares closed at $78.00 in New York yesterday, up 0.4 percent on the day and 2.9 percent this year.

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