The pink slips are flying in retail.
Tectonic shifts in the way consumers shop, disappointing profits and slowing traffic have all taken their toll this spring with retailers of every stripe cutting jobs. Target Corp., J. Crew, Gap Inc. and Ralph Lauren Corp. are among the companies that recently trimmed corporate head counts.
Experts warned that there could be more reductions if sales continue to migrate to the Internet and retailers downsize store fleets even more. The still slow and grinding economic recovery, along with consumers’ shifting priorities from apparel to electronics have also contributed to the tough environment.
Target on Thursday laid off 140 people at its Minneapolis headquarters, after cutting 550 jobs in February and 1,700 in March. The cuts were part of a “comprehensive corporate restructuring across our headquarters locations,” a spokeswoman said.
As reported, J. Crew, struggling with disappointing financial results and problems at the J. Crew brand, handed out 175 pink slips to employees at its corporate headquarters. And Gap said last week it will be closing 175 of its namesake stores and eliminating 250 jobs at its corporate headquarters, while Ralph Lauren Corp. in May began to cut 750 jobs as it adjusts its operating model.
“We’re looking at a slow growth period,” said Walter Loeb, president of Loeb Associates. “Retailers are trying to mitigate any shortfalls in earnings with job cuts. They’re generally concerned about the momentum of the business.”
To combat the general malaise, retailers are trying to trim down and run leaner, more responsive organizations.
“On a macro level, you’re seeing companies try to reduce as much of their fixed costs as possible as everything goes online and you’re competing with companies that have three employees,” said Simeon Siegel, a retail analyst at Nomura Securities. “Sales are going to be harder to come by because they have more competition. Retailers are figuring out how to rationalize their business models. It feels like we’re trying to figure out where tomorrow’s retail is going and retailers are trying to figure out how to make money in this new world order.”
Susan Anderson, a retail analyst at FBR & Co., said many of the job cuts and belt-tightening stem from “the structural shift and the saturation of retail.”
“America is overstored,” she said. “There’s a shift of online and the need for fewer stores. And retailers don’t need as many people with the technology.”
Gap’s store closures will cut its North American fleet down to 800 stores — 500 specialty locations and 300 outlets — from 977 units at the end of the fourth quarter. Gap brand comparable-store sales were down 5 percent last year worldwide.
In part, Gap’s troubles speak to a general weakness at malls, where traffic has declined and developers are scrambling to add attractions and bring in shoppers.
Department stores are feeling this pressure acutely and last month cut their headcount by 4,500 jobs, to employ a total of 1.3 million, according to the latest employment report from the Labor Department.
Scott Hoyt, senior director of consumer economics at Moody’s Analytics, said department stores are still “clearly hurting” as a result of ongoing consolidation, weakness in consumer spending on apparel, and e-commerce sales that are eating into brick-and-mortar store sales.
Even Macy’s Inc., one of the strongest department store players, said in January that a restructuring meant to bring its digital and physical operations closer together would result in the loss of 250 jobs for sales associates. (The digital trend can also add jobs and Macy’s also said its progress in digital retailing led to 150 new hires at its San Francisco-based technology hub.)
“The economy has recovered and is getting better every year, but we’re still not back to the heyday before the recession,” said Anderson at FBR. “People are still pressured out there. Incomes haven’t risen in a long time and people are picking and choosing where to spend their dollars.”
As for whether or not more job cuts are in the offing, Anderson said, “I think you could see more to come if we continue to see the growth of online.”
And as of right now, few are betting against online growth.