How Quickly Will Target Regain Trust After Hacking?

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Jan. 10 (Bloomberg) –- ISI Group Head of Consumer Research Greg Melich discusses Target’s hack fallout. He speaks with Erik Schatzker and Stephanie Ruhle on Bloomberg Television's "Market Makers." (Source: Bloomberg)

Head of consumer research, our guest.

Thank you for coming in.

People have lost a lot of confidence in sears.

But target is one of the most loved company.

What is and say that target had such a huge breach and could not get a handle on it?

We don't know yet.

What target is doing is the right thing, which is being as transparent as they can.

The key is, being upfront and talking about it as soon as you know about it gets you a lot of credit.

Public relations 101. they did not fester about it and they even talked about at the week before christmas.

If you are trying to get away with something and get better sales the week ahead of christmas, they could have let it slip before -- until january.

They were clearly not trying to do that.

You think they have handled this correctly and it could happen to anyone.

They absolutely are handling it as best they can and it is the world we live in now.

Tjx had a similar issue about seven years ago.

It was 40 million or more accounts and they took a $170 million charge, and it worked out over a few years.

A few years -- that is a lasting target wants to hear.

Are you saying that target will not get a pass from customers on this one?

Anyone who find out that there information was compromised will say, target, i'm sorry, i'm going to walmart.

Even though the results were disappointing today, the reason the sox are not down that much is because it has improved in january -- the stock is not down that much is because it has improved in january because of the way they've handled this.

How focused are they on this?

Woman were talking about jcpenney, we talked about their ceo issues.

But do jcpenney customers pay attention in the same way that target customers pay attention and say, i will be going to walmart instead?

I don't know, but my guess is that target will win back the trust relatively quickly.

This was an amazon christmas.

E-commerce is now up to 10% of u.s. retail sales.

People are now used to using credit information online.

They trust it.

I think people are getting used to what is public and private and this is just one more sample of that.

Before we run out of time, let's talk about sears.

What more could go wrong there?

At the current burn rate, it's about a billion dollars a year operationally.

We think they have about two years left at the current burn rate.

We have a cell on -- a cell rate on the stock.

-- sell rate on the stock.

Any chance of a turnaround based on the strategic moves they are taking?

They have been under investing for over a decade, even before eddie lampert got there.

And once you lose traffic, it can take retail a long time to fade away or die, but we have reached that point.

When you get down nine percent sales, or down five percent at kmart, and you are burning a billion dollars in cash, how do you fund your self?

They have to spend a ton of money to reinvent themselves to get those consumers back in there.

I'm not sure what somebody desires to go into sears to buy.

They have had traffic declines for many, many years now.

If you lose your customers and you have fewer than a year ago, it's very hard to get them back.

Are they passed the point of no return?

Stick a fork in it, it's done?

Retailers take a long time to die.

They were part -- there will be parts of sears that will exist many years beyond now, but my guess is that it will not look like it it does today.

Even darker beast about out.

Sears auto centers.

-- ebitda could be spun out.

Sears auto centers.

Going back to target, what is most important to consumers?

If target needed to raise their prices to make sure that they invest in protecting them from hackers, would that be ok?

You cannot make the customer pay for that security.

Security is a basic.

It is part of a fixed cost for retailers.

The answer is, sorry margins.

And not just for target, but for retail in general.

It is the reality of the world we live in.

Thank you.

This text has been automatically generated. It may not be 100% accurate.

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