Target Earnings Hit by Data Breach

Retailer Says Holiday Marketing Strategies Were Successful

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The 'My Kind of Holiday campaign' was deemed a success despite losses stemming from a data breach.
The 'My Kind of Holiday campaign' was deemed a success despite losses stemming from a data breach.

Target's fourth-quarter earnings took a hit after a data breach affected tens of millions of shoppers at the peak of the holiday season.

CEO Gregg Steinhafel has been working to keep customers coming in to stores after hackers stole card data and personal information from millions of shoppers. The second-largest U.S. discount retailer offered customers a weekend of 10% discounts in December and a year of free credit monitoring. Those efforts are beginning to pay off, Mr. Steinhafel said today.

"We will continue to work tirelessly to win back the confidence of our guests and deliver irresistible merchandise and offers, and we are encouraged that sales trends have improved in recent weeks," he said.

Target execs also noted that sales had been running positive prior to the data breach, indicating its marketing and merchandising strategies were on point. The retailer launched its marketing efforts, organized by the theme "My Kind of Holiday," the first week in November and included a new emphasis on Thanksgiving.

Net income fell 46% to $520 million, or 81 cents a share, from $961 million, or $1.47, a year earlier, the Minneapolis-based company said. Sales declined 5.3% to $21.5 billion in the period, which ended Feb. 1.

Target's U.S. comparable-store sales decreased 2.5% in the fourth quarter, in line with the company's forecast. It attributed the decline to the hacker intrusion.

The breach "is a serious situation, but one that we think Target should recover from," Jason DeRise, an analyst at UBS AG in New York, said in a note before the results were released.

Sales at the U.S. unit were "meaningfully weaker" after the data theft was disclosed, the company said in January. Executives testified before Congress on the matter earlier this year.

Target spent $61 million responding to the data breach last quarter, including costs to investigate the incident and offer identity-theft services to customers. Insurance covered $44 million of the tab, leaving the company with an expense of $17 million in the period. The expenses don't include potential claims by payment-card networks for counterfeit fraud losses.

"At this time we are not able to reasonably estimate a range of possible losses on the payment card networks' potential claims," Target said.

--Bloomberg News

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