Target: Breach Hurt ProfitsCompany Cites $17 Million in Direct Expenses
Target Corp. confirms that the December breach that affected 40 million credit and debit cards, along with personal information on up to 70 million customers, had a major impact on the company's earnings in the fourth quarter of 2013.
See Also: IoT is Happening Now: Are You Prepared?
The company had net earnings of $520 million for the fourth quarter that ended Feb. 1, down 46 percent, or $441 million, from the same quarter a year earlier. For the full fiscal year, Target had net earnings of $1.97 billion, down 34.3 percent from 2012, according to the company's latest earnings report.
Revenue for the quarter totaled $21.5 billion, down 3.8 percent from the same period a year earlier.
"During the first half of the fourth quarter, our guest-focused holiday merchandising and marketing plans drove better-than-expected sales," says Target chairman, president and CEO Gregg Steinhafel. "However, results softened meaningfully following our December announcement of a data breach.
"As we plan for the new fiscal year, we will continue to work tirelessly to win back the confidence of our guests ... and we are encouraged that sales trends have improved in recent weeks."
As a result of the breach, Target incurred $17 million in additional net expenses in the fourth quarter, the company said in its report.
The company says expenses include costs related to: investigating the data breach; offering credit monitoring and identity theft protection services to our guests; increased staffing in call centers; procurement of legal and other professional services; REDcard fraud losses and card replacement costs; and an accrual for a probable loss on payment card networks' anticipated claims for operating expenses incurred as a result of the breach.
On Dec. 23, Target confirmed malware was to blame for an infection of its point-of-sale system that likely exposed details associated with 40 million debit and credit cards between Nov. 27 and Dec. 15.