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Home Depot Shares Drop After Chain Investigates Data Breach

Home Depot Inc. has said it was working with banks and law enforcement to investigate a possible data breach. Photographer: Daniel Acker/Bloomberg
Home Depot Inc. has said it was working with banks and law enforcement to investigate a possible data breach. Photographer: Daniel Acker/Bloomberg

Sept. 2 (Bloomberg) -- Home Depot Inc., the largest home-improvement chain, fell the most in almost five months after saying it was working with banks and law enforcement to investigate a possible data breach.

“We’re looking into some unusual activity,” Paula Drake, a spokeswoman for the Atlanta-based company, said in an e-mailed statement. “We are aggressively gathering facts at this point while working to protect customers. If we confirm that a breach has occurred, we will make sure customers are notified immediately.”

Brian Krebs, the independent journalist who uncovered a hacker attack at Target Corp. last year, reported that a “massive” batch of stolen credit- and debit-card information went on sale this morning. There’s evidence that the cards are linked to Home Depot stores, Krebs said on his website, KrebsOnSecurity.

Home Depot shares dropped 2 percent to $91.15 at the close in New York, the largest decline since April 7. The stock has climbed 11 percent this year.

“The criminals are getting smarter faster than the companies,” said Jaime Katz, an analyst for Morningstar Inc. in Chicago. “If it is something on the scale of Target, there is obviously significant concern.”

‘Backoff’ Software

Hackers probably installed malicious software on Home Depot’s point-of-sale cash registers capable of stealing bank account information, names, card expiration dates and other data, said Trey Ford, global security strategist for Boston-based software security company Rapid7 LLC. The incident is probably another example of hackers relying on so-called Backoff malware, which the Secret Service estimates has been used to target more than 1,000 businesses over the past year.

“This is effectively a keystroke logger,” said Ford, who doesn’t have direct knowledge of the Home Depot attack. “It’s capturing all that stuff that comes in.”

Target, the Minneapolis-based discount chain, has shown how devastating a data breach can be to a retailer. Hackers struck the company last year during the height of the holiday shopping season, tarnishing its reputation and hampering sales. Target’s slow reaction to the incident also drew criticism from lawmakers, and the company ousted its chief executive officer in May. Brian Cornell, a former PepsiCo Inc. executive who took the helm at Target last month, is now working to pick up the pieces.

Target’s Warnings

An investigation by Bloomberg Businessweek found Target ignored warnings from its hacker-detection tools, leading to a breach that compromised 40 million credit-card numbers -- along with 70 million addresses, phone numbers and other pieces of personal information.

In Home Depot’s case, the suspected breach may have occurred in late April or early May and could encompass all 2,200 of the company’s stores in the U.S., Krebs said. That means it could be larger than the Target incident, he said.

The attack also may have been performed by the same group of hackers that infiltrated Target, possibly as retribution for the U.S. and Europe placing sanctions on Russia, Krebs said. Stolen cards were marketed on a website by the hackers as being “European Sanctions” and “American Sanctions,” he said.

Citigroup Inc., the third-biggest credit-card issuer in the U.S., said it’s stepping up prevention and detection efforts in the wake of the investigation.

Close Watch

“We are actively monitoring accounts, and if we see suspicious activity we will take appropriate actions, which may include reissuing cards for customers,” Janis Tarter, a spokeswoman for New York-based Citigroup, said in an e-mailed statement. “We want our customers to know that, consistent with legal requirements, they are not liable for any unauthorized use of their accounts.”

Trish Wexler at JPMorgan Chase & Co., the biggest U.S. credit-card lender, had no immediate comment.

Other chains have suffered hacker attacks in recent months, including the supermarket company Supervalu Inc. and the Asian-themed eatery P.F. Chang’s China Bistro Inc.

Apple Inc. also struggled with data-security woes this week, after nude photos of celebrities were stolen from iCloud accounts and posted online. Apple said today that the photos were stolen individually via targeted attacks and it didn’t suffer a data breach.

The hackers who targeted Home Depot probably took their time to retrieve the data without detection, Ford said.

“They are efficient, they are focused, and they manage their risk and exposure the same way a business person would,” he said. “It’s kind of a slow game of cat and mouse.”

To contact the reporters on this story: Chris Strohm in Washington at cstrohm1@bloomberg.net; Matt Townsend in New York at mtownsend9@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net; Elizabeth Wasserman at ewasserman2@bloomberg.net James Callan

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