NEW YORK - Target Corp.'s (TGT) massive data breach over the holidays helped push its fourth-quarter profit down 46 percent.
The discount retailer also said Wednesday that sales fell 5.3 percent as the breach scared off customers.The nation's second-largest discounter also offered a profit outlook below Wall Street expectations as the costs of the breach that affected millions of credit and debit card customers linger.
The discounter, 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
Revenue fell to $21.5 billion from
$22.7 billion. Revenue at stores open at least a year, an important retail
measurement, fell 2.5 percent.
Analysts had expected a profit of 80
cents on revenue of 21.5 billion, according to FactSet estimates.
The breach resulted in $17 million of
net expenses in the fourth quarter, Target said, with $61 million of total
expenses partially offset by the recognition of a $44 million insurance
Shares of Target rose 99 cents to
$57.50 in premarket trading Wednesday as earnings results beat Wall Street
estimates by a penny. The stock has fallen about 10 percent since the company
disclosed the breach in mid-December.
"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," Gregg Steinhafel, chairman, president and CEO of Target, said in a
The results underscore the big
challenges that Steinhafel faces.
Even before the breach, Target has
struggled with uneven sales since the recession as its middle-income shoppers
are still not comfortable in spending. And the company has also grappled with
the perception that its prices are too high.
Critics also say that the discounter,
known for its exclusive limited partnerships with designers, has lost its edge.
But a massive data breach that
compromised 40 million credit and debit card accounts between Nov. 27 and Dec.
15 shook confidence among its customers. Target disclosed the breach Dec. 19
and then on Jan. 10 it said that hackers also stole personal information -- including names, phone numbers as well as 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.
Last month when Target disclosed the
breach was wider than it thought, it forecast that revenue at stores open at
least a year would fall. It had originally expected the measure to be flat.
Target is offering free credit
monitoring services for a year to those who had their data compromised.
It isn't clear when Target will fully
recover from the breach, but Avivah Litan, a security analyst at Gartner Inc.,
a technology firm, puts the costs of the breach from the $400 million to $450
million. That would include the bills associated with fines from credit card
companies and services for its customers like free credit card report
Target's results are also being
weighed down by its stumbles in its expansion into Canada, its first foray
outside the U.S.
Target is trying to fix problems with
pricing and shortages in various items. The company has been opening stores in
waves that added up to about 124 stores, at locations once owned by Canadian
retailer Zellers, by the end of last year.
The company said it expects earnings
per share for the current quarter range from 60 cents to 75 cents. Analysts had
previously expected 88 cents.
For the full year, Target expects earnings per share to range between $3.85 and $4.15. Analysts had expected $4.21.