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Target has announced a reduction in performance bonuses for salaried employees, citing weaker consumer spending, economic challenges and adverse reaction to its cancellation of DEI initiatives.
Eligible workers will receive 87% of their 2024 bonuses, a sharp drop from the previous year when employees were awarded 100% of their bonus, with some receiving even larger payouts, according to sources cited by Bloomberg.
The move follows the retailer’s latest earnings report, which projected a cautious outlook due to economic uncertainty and potential tariff-related cost increases. Target has not publicly commented on the bonus adjustments.
DEI decision impacts sales
Adding to Target’s struggles, the company has scaled back its diversity, equity, and inclusion (DEI) initiatives - a decision that has contributed to a significant decline in foot traffic and sparked a 40-day consumer boycott. Other major retailers, including Walmart and McDonald’s, have also reduced DEI programs in response to shifting corporate priorities, but Target has faced additional scrutiny, including shareholder lawsuits alleging the company failed to disclose risks tied to its DEI efforts. The state of Florida has also filed legal action against the retailer.
CEO Brian Cornell has warned that fresh produce imports from Mexico, including bananas, avocados, and strawberries, will likely see price increases due to new trade tariffs introduced by Donald Trump. To navigate market volatility, Target executives have decided to shift from quarterly earnings guidance to annual forecasts.
Expansion plans and price cuts
Despite its financial struggles, Target is moving forward with a multi-billion-dollar investment strategy aimed at revitalizing sales. The company plans to invest between $4billion and $5billion this year to modernize existing locations and open 20 new stores, with three already launched in Arizona, California, and Texas. Over the next decade, Target intends to expand its footprint by adding 300 new stores across the US.
To attract budget-conscious shoppers, the retailer has aggressively reduced prices on non-essential items such as apparel and home goods. Additionally, Target is bolstering its private-label food brand, Good & Gather, by introducing 600 new food and beverage products.
While a partnership with Taylor Swift to sell The Eras Tour Book briefly boosted holiday traffic, the company is still working to regain momentum after posting its largest earnings miss in years last November, which led to a 20% stock decline. The success of its cost-cutting measures and store expansions will determine whether Target can regain its position as a top destination for shoppers.
The debate over DEI in the workplace has seen the retailer caught between a rock and a hard place, seeking to appease right-wing critics of diversity, but losing customers when it publicly announced it was dropping such programs. Factoring in how to prevent that debate from hitting its bottom line will be a cornerstone component of its recruitment practices going forward.
