Target cuts outlook; discloses wider data breach
Minneapolis -- Target Corp. on Friday cuts its profit forecast on the heels of disappointing fourth quarter same-store sales. The retailer also disclosed that its previously announced data breach involved many more people was much wider than it initially thought.
Target said that it expects same-store sales will fall 2.5%, from estimates of no change previously. And as part of its ongoing investigation into the data breach, Target said it learned that the names, mailing addresses, phone numbers or email addresses for up to 70 million individuals also had been stolen. The company said those 70 million people were separate from the approximately 40 million credit and debit card accounts previously reported as compromised, though there was some overlap. Target stressed that the newly disclosed information was not a new breach but was uncovered as part of its continuing investigation.
“I know that it is frustrating for our guests to learn that this information was taken and we are truly sorry they are having to endure this,” stated Gregg Steinhafel, Target chairman, president and CEO. “I also want our guests to know that understanding and sharing the facts related to this incident is important to me and the entire Target team.”
Target said it will offer one year of free credit monitoring and identity theft protection to all U.S. customers.
The company said its sales were stronger than expected prior to the December 19, 2013 disclosure of the data breach. Once the news broke, things headed south quickly and the company said is saw “meaningfully weaker” than expected sales, even though it instituted a 10% across the board discount for customers who shopped its stores the final weekend before Christmas.
Target said it is likely to incur a charge whose size it isn’t yet able to estimate because it doesn’t know how much it will have to spend on a range of data-breach related costs. According to the company, the costs may include liabilities to payment card networks for reimbursements of credit card fraud and card reissuance costs, liabilities related to REDcard fraud and card re-issuance, liabilities from civil litigation, governmental investigations and enforcement proceedings, expenses for legal, investigative and consulting fees, and incremental expenses and capital investments for remediation activities.
“In light of the recent data breach, our top priority is taking care of our guests and helping them feel confident in shopping at Target,” said Target CFO John Mulligan. “At the same time, we remain keenly focused on driving profitable top-line growth and investing our resources to deliver superior financial results over time. While we are disappointed in our 2013 performance, we continue to manage our business with great discipline and leverage our expense optimization efforts to reinvest in multichannel initiatives that generate long-term value for our shareholders.”