Target data breach hits chain’s profits

Retailer says stolen credit card data scared off customers and caused a significant drop in revenue

Target sales have slipped significantly since hackers stole data from millions of customers in December.
Joe Raedle/Getty Images

Target Corp. announced on Wednesday that the theft of customers’ credit card information and other personal data during the 2013 holiday shopping season resulted in a 46 percent drop in fourth-quarter profit and a 5.3 percent dip in revenue, adding that the episode may cost the company even more.

In December, personal data from millions of Target customers was stolen by hackers who targeted the retailer’s credit card terminals. The incident scared shoppers away and caused stock value to drop about 10 percent.

The retailer, based in Minneapolis, said it earned $520 million, or 81 cents per share, for the three months that ended Feb. 1. That compares with a profit of $961 million, or $1.47 per share, a year earlier.

But investors, who sent Target shares up nearly 4 percent, or $2.19, to $58.70 in premarket trading on Wednesday, seemed soothed that sales were recovering. 

"As we plan for the new fiscal year, we will continue to work tirelessly to win back the confidence of our guests ... We are encouraged that sales trends have improved in recent weeks," said Target CEO Gregg Steinhafel.

The company, noentheless, said it can't yet estimate how much more the data breach will cost.

Target said expenses may include payments to credit card networks to cover losses and expenses for reissuing cards, lawsuits, government investigations and enforcement proceedings. The costs could hurt the company's first-quarter and full-year earnings, it said.

The massive data breach compromised 40 million credit and debit card accounts between Nov. 27 and Dec. 15.

Target disclosed the breach Dec. 19, and then on Jan. 10 it said that hackers had also stolen personal information — including names, phone numbers and email and mailing addresses — from as many as 70 million customers.

When the final tally is in, Target's breach may eclipse the biggest known data breach at a retailer, one disclosed in 2007 at the parent company of TJMaxx that affected 90 million records.

Target is offering free credit-monitoring services for a year to those who had their data compromised.

John Mulligan, the company's chief financial officer, told The Associated Press on Wednesday that loyal customers have stuck with Target, but wooing back others will take time.

"We need to remind people why they fell in love with Target," he said.

The company is now accelerating its $100 million plan to implement the use of chip-enabled technology by early 2015 in all 1,800 stores to protect itself against cyberthieves.

It isn't clear when Target will fully recover from the breach, but Avivah Litan, a security analyst at Gartner, said that when all is said and done, it could end up costing the retailer between $400 million and $450 million.

Target's results are also being weighed down by stumbles in its expansion into Canada, its first foray outside the U.S.

Target is trying to fix problems with shortages and Canadians' perception that its prices are too high. The company had opened about 124 stores, at locations once owned by the Canadian retailer Zellers, by the end of 2013.

Al Jazeera and The Associated Press

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