Target 4Q earnings hurt by data breach
February 26, 2014,
Minneapolis - Target reported today that its fourth quarter earnings took a significant hit from the holiday season data breach, dropping 46% from a year ago, but executives said the company remains in a strong financial position.
The retailer said fourth quarter net earnings were $520 million, or $0.81 per share, compared to $961 million or $1.47 per share in the year-ago quarter.
Gregg Steinhafel, chairman, president and ceo, called 2013 "a disappointing year," during the company's earnings conference call. However, he also noted that sales have started to recover and that the company expects to absorb the impact from the breach.
Also on the call, John Mulligan, cfo noted that the company was in a good position to weather the breach. "We have the financial strength to move beyond [this]," he said.
In fourth quarter 2013, sales decreased 6.6% to $20.9 billion, reflecting the impact of an additional accounting week in 2012 and a 2.5% decrease in comparable sales, partially offset by the contribution from new stores.
On Dec. 19, Target acknowledged that cyber thieves gained access to its network and stole payment card and other consumer information. Because of the breach, the company reported $61 million in expenses - such as credit monitoring and indemnity theft protection for shoppers, which will be offset by a $44 million insurance payment, for a net cost of $17 million. The retailer said it is not able to estimate future expenses related to the data breach.
For the 12 months ending Feb. 1, Target's earnings were $1.97 billion, a drop of 34.3%. Sales for the year rose 0.9% to $72.6 billion.
In fourth quarter 2013, Target's Canadian segment generated sales of $623 million and a gross margin rate of 4.4%, which reflected efforts to clear excess inventory, the company said.