Target says cuts to workers are off-limits as it hunts for up to $3 billion in savings
- Target, bracing for leaner sales, wants to cut $2 billion to $3 billion of operating costs.
- One area the company says it won't touch: its investment in "the best team in retail."
As retail sales return to Earth after their pandemic-era flight, many companies are under increasing investor pressure to find creative ways to deliver a profit.
Target has tasked Mike O'Neil, a senior vice president of financial planning and analysis, to lead its wide-ranging hunt to cut $2 billion to $3 billion out of the company's operating costs over the next several years.
One area that's off-limits, O'Neil said Tuesday, is Target's investments in "the best team in retail."
"We're not going to take away anything, given the investments we've made in the team over the last couple years," O'Neil said at the company's earnings presentation Tuesday.
Target is not alone in telling investors to expect higher payroll costs as alarm bells continue to ring over declining consumer spending and concerns of an economic downturn.
Lowe's CEO Marvin Ellison on Wednesday said the company's spending on employee compensation had increased by $3 billion since 2018, and would grow by another $1 billion over the next three years.
Ellison also said that Lowe's is the highest-paying retailer in certain smaller markets.
Both companies echo similar sentiments shared last week when Walmart and Home Depot reported earnings and committed major cash to recruit and retain workers.
All four are the latest examples of an ongoing trend of "labor hoarding" in retail.
Even as tech sector layoffs make headlines and companies brace for a tougher road ahead, major retailers are opting to hang onto all the front-line workers they can.
Retail workers are still quitting at elevated rates, and total monthly layoffs remain at just three-quarters of their normal, pre-pandemic average, according to Indeed Hiring Lab's latest US labor market report.
That leaves companies in somewhat of a stalemate over staffing with the US unemployment rate at record lows.
Recent years have shown retailers how severely labor shortages can impact sales and customer satisfaction, which in turn can impact profits and market share.
So some are investing in the front line now in hopes of better protecting the business in the future.