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Data-breach costs take toll on Target profit

Target Sales Hit by Data Breach

NEW YORK (AP) - Target Corp. will be feeling the financial pain for a while from the theft of credit card numbers and other information from millions of its customers.

The retailer said Wednesday that its fourth-quarter profit slumped 46 percent. It also reported that revenue slipped 5.3 percent as the breach scared off customers.

In November and December, personal data from millions of Target customers was stolen by hackers who targeted credit card terminals in its stores. The incident has scared shoppers away and the company says its profits will be affected well into 2014.

"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 statement.

The data breach, in which hackers stole credit card and debit card information and personal data from millions of shoppers, comes on top of other woes, including sluggish sales in the U.S. and a disappointing foray into Canada.

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.

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

Target said expenses may include payments to card networks to cover losses and expenses for reissuing cards, lawsuits, government investigations and enforcement proceedings.

"These costs may have a material adverse effect on Target's results of operations in first quarter and full year 2014 and future periods," the company said in the release.

Shares of Target rose 68 cents to $57.19 in premarket trading Wednesday as the 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.

While the company said that sales have been recovering, the big issue is how much work does Target need to do to bring back customers who are still scared to shop there.

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 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.

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., puts the costs of the breach at between $400 million and $450 million. That would include the bills associated with fines from credit card companies and services for customers like free credit card report monitoring.

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 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 to 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.

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Susan February 26 2014 at 10:55 AM

Just received new cards in the mail from my credit card company Saturday. Credit card companies are being careful and replacing everyone's. I closed my other online card this morning. The fact that hackers still may have my email and home addresses, my name and phone number still makes me feel sick. I can only change two of those things because I don't want to move!
I had been waiting to see some numbers on how much this is going to cost Target. I don't see how they stay in business after this. We haven't been back to the store and if we go someday, will only pay in cash. They need an awful lot of sales to even try to recover and I'm not sure Americans will give them that chance. Other retailers will gain from their loss, but just what are they doing to protect our information?

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grelbrich February 26 2014 at 3:27 PM

I was not affected by the breach, to my knowledge. But that doesn't mean addresses and bank
information were necessarily safe. Now I am very watchful of personal information. I did apply
for a new Target credit card - but have not activated it. Nothing of a personal nature appears to
be sacred any more.

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lancaeriel February 26 2014 at 1:43 PM

I was affected by the breach as well, and I still shop there. If I were to stop using my credit cards because of this breach, I would never shop again.....things like this are bound to happen. So many people know how to hack the systems. Also, Target was not the only store to be hit with this.....there were others. I know it made me feel better that the Target CEO was actually acknowledging that this happened and that they were going to do something about it. I don't hear any of the other retailers doing that.

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cindyde February 26 2014 at 1:37 PM

I have a gift card but I am too lazy to actually find a target and go to it....meh **** target

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meneas February 26 2014 at 1:34 PM

This cost me a lot of time (money) to call different places to change the information I have with them. What was the final straw on this was their CEO saying he was sorry for their 'guests'. You don't invite someone over to your party and then rob their coat pockets laying on the backroom bed. Without these 'guests', Mr CEO, you would be walking the streets looking for another job. Wrong words at the wrong time.

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bdgrizcp meneas February 26 2014 at 4:18 PM

Target has always referred to customers as guests. It's just a word. I agree they did not handle it well at all.

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donnalee57 February 26 2014 at 12:50 PM

i know i have a hard time going back to target. the scam hit me and i find it hard to go back there. i always use my debit to shop and i will not take the chance of it happening again. i know it can happen anywhere but just don;t feel they have a handle on it yet

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Jeanne February 26 2014 at 11:30 AM

Target is not the only store to be targeted (no pun intended). I stopped buying anything on my computer, using a credit card. I had faith in people at one time, but when a popular pc company got into my computer to fix something, I was hacked. Thank goodness I have an excellent bank who called my attention to it. The bank spotted it right away, because I only used a certain card online which my bank new and realized I never went over a certain amount on that card. So, never, never will I EVER buy anything online. Even the dollar for my credit score was for naught, and I never got that, either.

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dennismlns February 26 2014 at 11:24 AM

It isn't taking any toll on Target profets, it's the shair holder that is losing, not Target.

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rude February 26 2014 at 11:08 AM

Shopped Target ONCE in 2013........and some SOB tried to charge $900 on my card at a Target in NYC on Super Bowl Saturday. The Exp. date waas changed so it was declined. Don't they have these parasites on film? Hope they put these thieves away in a cell for many many years.

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bdgrizcp February 26 2014 at 4:26 PM

I think the Target situation goes deeper than the data breach. They have cut staff at stores here in south FL--where they have a monster presence--within five miles of my front door are three SuperTargets and one regular Target. They are beginning to aggressively shed variety in grocery items. The question I have for Target, which they have not addressed, is did staff cutbacks in home office or tech center jobs precipitate the breach? Nothing a pissed off computer geek wouldn't do, right?

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