By Nicole Maestri

"Target is taking actions to manage payroll and non-payroll expense in the current environment," the retailer said in a statement sent to Reuters.

"While we can confirm that these actions include a workforce reduction, we cannot provide additional details at this time out of respect for our team members," the company said. "We will provide more information at an appropriate time later today once we have more fully addressed the needs of our team."

Target made a name for itself selling cheap but trendy designer clothes and home decor, though its business has faltered in the U.S. recession as shoppers shift spending in favor of basics, like food and toiletries.

That shift has hurt Target, where discretionary merchandise like clothes and furniture account for roughly 40 percent of sales, and helped larger rival Wal-Mart Stores Inc.

In November, Target reported its fifth consecutive drop in quarterly profit, said it was temporarily suspending nearly all of its share buybacks and cut its 2009 capital spending plan by $1 billion.

Joseph Beaulieu, a retail analyst at Morningstar, said Target needed to be careful to avoid cutting jobs in a way that would hurt the way it operates in its stores.

"A big way they differentiate themselves from other discounters is with the store experience and keeping a neat, clean store with plenty of check-out aisles," he said.

"If they degraded their store experience, that could be an opportunity for Wal-Mart to go after their slightly more affluent customer base."

Wal-Mart has said it is gaining market share amid the recession, including winning business from customers with higher incomes who previously did not shop in its stores.

Target shares closed up 19 cents to $33.34 on the New York Stock Exchange.

(Reporting by Nicole Maestri; Editing by Gary Hill and Carol Bishopric)