Target Faces Profit Loss
| Published February 26, 2014 |
By Thursday Review staff
It was, perhaps, a predictable outcome to what may have been the biggest credit card data breach in U.S. history: retail giant Target reported this week that store revenue fell by over a billion dollars from the same period last year.
Target has struggled to regain customers after a data breach between mid-November and late December resulted in the theft of as many as 40 million credit users’ data, along with another 70 million customers who may have shopped at Target stores during the previous year.
2013 holiday season sales were slow across the board, especially in certain areas. Severe winter weather may have exacerbated the slump, along with consumer worries about the economy. But the Target hack slammed the brakes on millions of dollars in sales in the big box stores, and may have (like the extreme weather) shepherded even more customers toward online purchases. Amazon reported their best holiday season ever.
Target’s announcement was mixed with some good news, including an optimistic view that sales have been slowly, measurably coming back. Target CEO Gregg Steinhafel said in a statement that early data shows improvement in sales over the last few weeks, a sign that customers have regained confidence.
Still, despite signs of recovery, Target faces an uphill battle. It had hoped that its holiday sales would meet their expected high-water mark, and instead the security breach suppressed sales at thousands of U.S. stores and in scores of newly built stores in Canada. The cost of the data breach alone exceeded $17 million in fees, write-downs, fines from credit companies and banks, and in other unexpected internal costs in the fourth quarter (and now in the first quarter of 2014).
In late January of this year, the retailer announced the layoff of around 450 employees, most of them in Target’s hometown of Minneapolis where corporate offices and operations centers are located.
Target announced this week that its earnings were down to $520 million, down from $961 million for the same three months ending in February of last year.
Target has apologized to customers publicly and in statements mailed and emailed to its customer base, and has offered free credit monitoring for those affected by the data breach. During approximately the same period last year, hackers also stole data from other major retailers, including Neiman Marcus and Michael’s.
Related Thursday Review articles:
Who Pays for the Target Breach?; R. Alan Clanton; Thursday Review; January 15, 2014