Wesfarmers' Target to axe jobs: report

Wesfarmers Ltd-owned department store Target is set to announce hundreds of job cuts, as well as an operational restructure, Fairfax Media reports.

The news comes just weeks after Wesfarmers chief executive Richard Goyder issued a profit warning for Target, saying he expected the department store's full-year earnings to be "disappointing" on a weak second-half sales performance.

In a statement to the Australian Securities Exchange, Mr Goyder said while the earnings will come in lower than expected, appropriate action has been taken to improve its future earnings and competitive position and maintain its strong brand in the Australian market.

According to the media outlet, several jobs in Target's marketing department were cut last week, with reports an additional 200 back-offcie jobs are set to be axed in the immediate future.

Wesfarmers shares fell 0.86 per to $38.25 at 1030 AEST, against a benchmark fall of 0.72 per cent.

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Wesfarmers faces a dilemna with Target. Its Kmart and Target businesses largely overlap, resulting in unnecessary cost duplications. Kmart has far more scope for growth, by offering larger volumes and a wider range of lower –cost consumer goods. Wesfarmers only needs one brand to retail products to the general mass market. However, Wesfarmers may be reluctant to divest Target to avoid any new retail player emerging in the industry. A new Target owner, with large backing, might try to aggressively resurge this well-known, but not selling, brand. The best option could be for Wesfarmers to retain the Target brand but operate it on a much more limited scale. Substantial overhead reductions can be achieved by reducing locations, floor space, inventories and labour.