Target Stores' Customers Hit by Major Credit Card Attack

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Target stores' customers hit by major credit card attack
Jeff Chiu/AP
By Siddharth Cavale
and Jim Finkle


Target said data from about 40 million debit and credit cards might have been stolen from shoppers at its stores during the first three weeks of the holiday season, in the second-largest card breach at a U.S. retailer.

The data theft, unprecedented in its ferocity, took place over a 19-day period that began the day before Thanksgiving. Target said Thursday that it identified and resolved the issue on Dec. 15.

Target Stores (TGT) shares fell as much as 3.2 percent before the bell.

Though smaller than the breach disclosed in March 2007 by TJX Cos. (TJX), parent of apparel chains TJ Maxx and Marshalls, the data theft took place over a much shorter period and hit shoppers at the beginning of the U.S. holiday season.

Target said the breach might have compromised accounts between Nov. 27 and Dec. 15, a period of nearly three weeks.

The data theft revealed by TJX took place over 18 months, affecting 45.7 million payment cards, according to the company. %VIRTUAL-article-sponsoredlinks%Banks later said in court documents that the hackers could have obtained more than 94 million account numbers in the TJX case.

On Thursday, Target told customers in an alert on its website that the criminals had stolen customer names, payment card numbers, expiration dates and their CVV security codes.

"On Dec. 15, we were able to identify an unauthorized access and we were able at that time to resolve the issue," Target spokeswoman Molly Snyder said by telephone.

Krebs on Security, a closely watched security industry blog that broke the news Wednesday, said the breach involved nearly all of Target's 1,797 stores in the United States and investigators believed the data was obtained via software installed on point-of-sales terminals used to swipe magnetic strips on payment cards.

It isn't yet clear how the attackers were able to compromise point-of-sales terminals at so many Target stores. "It is very clear it is a sophisticated crime," Snyder said.

The U.S. Secret Service is working on the investigation, according to an agency spokeswoman. A Federal Bureau of Investigation spokeswoman declined to comment.

"While this search for the truth is happening, the issue damages the trust Target have gained in mobile and calls into question how sales [will] trend in January," said Brian Sozzi, chief executive officer of Belus Capital Advisors.

MasterCard (MA) and Visa (V) officials had declined to comment late Wednesday, after news of the breach surfaced. An American Express (AXP) spokeswoman said the company was aware of the incident and was putting fraud controls in place.

Target said it had alerted authorities and financial institutions immediately after it was made aware of the unauthorized access and that it was "putting all appropriate resources behind these efforts."

The company said it hired a forensics firm to investigate the incident.

Target's shares were down 1.7 percent an hour before the market was due to open.

The shares, which have risen 7.4 percent this year, closed at $63.55 on the New York Stock Exchange on Wednesday. The stock has largely underperformed the broader S&P 500 index, which has risen 27 percent this year.

-Writing by Robin Paxton.

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Target Stores' Customers Hit by Major Credit Card Attack
Percentage of U.S. population who visited in March: 14.2%
 Revenue: $73.3 billion
 1-year stock price change: 27.56%
 Store category: Discount & variety stores

Target (TGT) was the second most-visited discount retailer in the U.S. during March, behind only Walmart. One reason was the number of Target stores. The company has been attempting to take on Walmart by adding grocery sections to more  stores, and by offering groceries at competitive prices. This has helped Target maintain strong financial performance despite the weak economy and its additional spending on its launch in Canada. Most Americans surveyed by the American Customer Satisfaction Index rated Target well: It finished in a three-way tie for second place in the department and discount store category, behind Nordstrom.
Percentage of U.S. population who visited in March: 18.2%
 Revenue: $13.6 billion
 1-year stock price change: -3.89%
 Store category: Fast food

As recently as 2011, Taco Bell (YUM) was struggling to keep competitor Chipotle (CMG) from taking its customers, with flat or negative same-store sales growth in each quarter that year. This changed in early 2012, when Taco Bell released the Doritos Locos taco, a hard taco with the flavor of Doritos nacho chips. That item help the company increase comparable sales in every quarter of 2012, as the company sold more than 1 million of them a day. In March, Taco Bell CEO Greg Creed told The Daily Beast the company had hired 15,000 workers just to meet demand for the Doritos Locos taco in 2012. Last year, the company's sales increased by $1 billion to $11.8 billion, and net income rose by roughly $300 million to $1.6 billion.
Percentage of U.S. population who visited in March: 18.9%
 Revenue: $123.1 billion
 1-yr. stock price change: 27.56%
 Store category: Drugstore

CVS (CVS)  is the top provider of prescriptions in the country, filling or managing more than 1 billion prescriptions a year. It has operates in 45 states, and 75% of the people in the markets it serves live within three miles one of the company's 7,400 retail stores. Last year, CVS estimated it gained millions of new customers following a dispute between Walgreens (WAG) and Express Scripts (ESRX), the prescription management service. Even after the dispute was resolved, CVS was able to retain many customers who used to fill prescriptions at Walgreens. In the first quarter of 2013, the company's revenue grew 5%, as same-store sales grew 4%.

Percentage of U.S. population who visited in March: 22.7%
 Revenue: $71.6 billion
 1-year stock price change: 42.17%
 Store category: Drugstore

Despite CVS's gains, Walgreens is still the most visited drugstore in the country. According to RetailSails, the company has the most stores, at 7,890, and the largest average store, at 14,400 square feet, among all drugstore chains. The company's tenure in first place may not last, however, thanks to that now-resolved dispute with Express Scripts. The company spent nearly nine months without using Express Scripts, the largest prescription management service in the country, losing an estimated 60 million prescriptions to rivals. CVS estimates that it will retain roughly half of the Walgreen's customers it gained as a result of the squabble.
Percentage of U.S. population who visited in March: 22.8%
 Revenue: $2.5 billion
 1-Year stock price change: 11.84%
 Store category: Fast food

In 2011, Wendy's (WEN) overall sales surpassed Burger King's, making it the second-largest burger chain in the U.S. But Wendy's growth has actually been quite modest as of late, with same-store sales in North America growing just 1.6% from 2011 to 2012. (In fact, Wendy's first-quarter profit just tumbled 83%.) Wendy's is in the process of remodeling many of its restaurants with more comfortable seating arrangements and flat-screen televisions. However, not all of its stores are getting upgraded. The company announced in March it was going to shutter as many as 130 underperforming stores. Last year, the company also made significant changes in its marketing strategy and menu in order to attract customers who have been lured in by chains such as Panera, which promotes healthier food at slightly higher prices.
Percentage of U.S. population who visited in March: 23.9%
 Revenue: $13.3 billion
 1-year stock price change: 12.46%
 Store category: Coffee

There is a reason Starbucks (SBUX) is No. 1 in the coffee category: Sales in the U.S. grew by nearly 346% between 2001 and 2012, and the number of stores grew by 195%. The company has struggled in the U.S. in the past several years, but its stock has continued to rise as global sales have helped to pick up the slack. Worldwide, Starbucks revenue grew by 7% in 2012 compared to 2011. This included a 15% growth in the Asia/Pacific region. In its early years, the company did not place much emphasis on its food items. However, that has changed in recent years, especially following the purchase of Bay Area pastry chain La Boulangerie. However, some industry analysts remain skeptical of Starbucks' ability to compete for customers' breakfast purchases.
Percentage of U.S. population who visited in March: 24.3%
 Revenue: $2.0 billion
 1-year stock price change: N/A
 Store category: Fast food

The last decade or so has been especially tumultuous for Burger King: It was taken private in two separate instances, in 2002 and in 2010, and became a public company again last June. The company hasn't performed well in years, with an average growth rate of -0.1% between 2001 and 2013, which allowed Wendy's to take its No. 2 burger chain title. A restructuring that began after the second buyout in 2010, in which many stores were sold to franchisees, has cut deeply into the company's sales. But not all news for Burger King is bad news: Nearly one quarter of Americans visited a Burger King in March.
Percentage of U.S. population who visited in March: 37.8%
 Revenue: N/A
 1-year stock price change: N/A
 Store category: Fast food

Between 2001 and 2012, Subway's sales in the U.S. grew nearly 169%, while the number of stores grew nearly 93%. Subway is by far the largest fast food chain in the U.S., with almost 26,000 restaurants. The company has been able to fuel its large growth through both international expansion and a domestic focus on healthy eating, most notably using ads featuring Jared Fogle -- a man who lost an impressive amount of weight while regularly eating the company's sandwiches. In 2013, for the ninth year in a row, Subway received the highest score in the country in a Harris Poll EquiTrend study in the "quick service restaurants" category and was named brand of the year by that group.
Percentage of U.S. population who visited in March: 38.8%
 Revenue: $469.2 billion
 1-year  stock price change: 34.29%
 Store category: Discount & variety stores

Walmart (WMT) is by far the largest retailer in the U.S. and in many parts of the world. It was recently ranked No. 1 in the Fortune 500 after it reported more than $469 billion in worldwide revenue in 2012. While international markets are critical to growth, the U.S. market provides the majority of its revenue: U.S. sales comprise 62% of the company's sales. In the last five years, Walmart has added 450 U.S. stores, a 13% increase overall. However, according to Bloomberg, the company's U.S. workforce has dropped 1.4% in that time frame, leading customers to complain about a lack of inventory and longer check-out lines -- and to defect to rivals such as Target and Costco. In February, the American Customer Service Index ranked Walmart the lowest of all discount retailers, the sixth year in a row the chain has held or tied for the last place spot.

Percentage of U.S. population who visited in March: 49.0%
 Revenue: $27.6 billion
1-year stock price change: 6.92%
 Store category: Fast food<

Almost half of all Americans visited a McDonald's (MCD) in March, but, U.S. sales of $8.8 billion weren't even the company's largest revenue segment last year. Rather it was the company's sales in Europe of $10.8 billion. According to Technomic, McDonald's same-store sales grew at an annualized rate of nearly 5% from 2001 through 2012. However, this has slowed recently: The company's systemwide sales in the United States rose by just 0.3% from the year before in the final quarter of 2012. The company is already so large that its bottom line is deeply linked to global economic conditions, leaving it unable to raise prices for now. In order to boost sales, McDonald's CEO Bob Thompson told CNBC the company may try allowing U.S. stores to serve breakfast all day.

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