Target Lowers Forecast, Estimates Breach Costs
NEW YORK (AP) -- Target has lowered its second-quarter forecast citing the promotional discounts it had to use to attract shoppers.
The Minneapolis-based retailer also said Tuesday it expects gross expenses tied to a massive data breach this past winter to come to $148 million in the period, which will be offset by $38 million in insurance. It also paid $1 billion to retire $725 million in debt.
Target Corp. has been reeling since it announced in December that hackers stole millions of customers' credit- and debit-card records. The theft hurt the chain's reputation and profits and spawned dozens of legal actions. Target is facing troubles on a number of other fronts as well, including the perceptions that its prices are higher than those at Wal-Mart Stores Inc.
The company's expansion into Canada, its first foray outside the U.S., has also been a disappointment. Analysts have said that Target botched its Canadian expansion by moving too aggressively.
In hopes of turning a new page, the company last week named PepsiCo executive Brian Cornell as its CEO. Cornell will be the first outsider to serve in the top spot at the company when he starts Aug. 12.
For its second quarter, Target said it expects sales to be flat at established locations in the U.S., as "guests continue to spend cautiously and focus on value" and that promotional discounts are expected to hurt profit margins. Sales are expected to be "somewhat softer" at its stores in Canada as well.
Its shares fell more than 3 percent to $58.39 premarket trading.
The company now expects to earn around 78 cents per share for the quarter, excluding one-time items, down from the 85 cents to $1 per share it previously forecast. When factoring in the costs related to the data breach and the debt repayment, reported earnings per share are expected to be about 41 cent lower than that adjusted figure.
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