Target Raises Estimate of Customers Hit by Breach
Target Corp. (TGT), the second-largest U.S. discount retailer, cut its U.S. unit’s fourth-quarter forecast and said the recent security breach affected more people and more information than previously thought.
Names, home and e-mail addresses for as many as 70 million people were taken, the Minneapolis-based company said today in a statement. Target previously said credit- and debit-card data of 40 million accounts was stolen. It’s likely that the two groups overlap, though it’s unclear to what extent, Molly Snyder, a spokeswoman, said today in an interview.
Target is trying to keep customers’ loyalty after their card data was stolen while they made purchases in stores during the holidays, retailers’ most important season of the year and a time when many shoppers already were showing restraint. The company said it couldn’t estimate the breakdown’s costs and they may have a material adverse effect on fourth-quarter results.
“What makes it more difficult is business hasn’t been good, you start gaining a little traction, then boom, this happens,” Brian Yarbrough, a St. Louis-based analyst at Edward Jones & Co., said in a phone interview.
Yarbrough said the effects of the breach won’t last long term and recommends buying the shares.
Target dropped 1.1 percent to $62.62 at the close in New York. The shares rose 6.9 percent last year, compared with a 30 percent increase for the Standard & Poor’s 500 Index.
Sales at the U.S. unit were “meaningfully weaker” after the data theft was disclosed, the company said. U.S. same-store sales will fall about 2.5 percent in the quarter through January, compared with an earlier projection they would be little changed. Adjusted earnings per share will be $1.20 to $1.30 for the division, down from a previous estimate of at least $1.50.
The company also said it would close eight U.S. stores on May 3. The locations affected are in Illinois, Nevada, Georgia, Tennessee, Florida and Ohio. Employees will be offered transfers to nearby stores. Each store has about 70 to 125 workers, and while the “vast majority” of workers choose to take positions, Target doesn’t know how many will do so, Snyder said.
The breach occurred when a computer virus infected Target’s point-of-sale terminals where shoppers swipe a credit or debit card to make a purchase, a person familiar with the matter said last month. The person asked not to be identified because the investigation is private. The breach affected many types of credit and debit cards used at the stores, not just Target-branded cards.
The retailer is already facing almost two dozen lawsuits, mostly from customers accusing the company of failing to safeguard their information.
The U.S. Secret Service said it was investigating the breach, along with two states’ attorneys general.
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