Target Smarts From Massive Hack

In the first close look at Target’s financials since its massive credit-card data hack during the holiday season, the retailer says its fourth-quarter profits took a 46% nosedive. And same-store sales for the quarter, which had been doing well until the Dec. 19 breach bombshell, fell 2.5%.

“During the first half of the fourth quarter, our guest-focused holiday merchandising and marketing plans drove better-than-expected sales,” says Gregg Steinhafel, its chairman, president and CEO, in its release. “However, results softened meaningfully following our December announcement of a data breach.”

The Minneapolis-based retailer says net earnings for the fiscal fourth quarter fell to $520 million, compared with $961 million in the same period last year. And sales declined 3.8% to $21.52 billion from $22.73 billion last year.

Wall Street responded with could-have-been-much-worse enthusiasm, but some analysts are more reserved.While we’re not surprised to see the relief rally in Target shares…we are not convinced that it’s time to step up to the plate and go long,” write Sterne Agee’s team of retail analysts, calling Target’s forecasts for the year ahead “a bit optimistic.” It says that longer term, the company still faces considerable structural hurdles in grocery and e-commerce. And the company’s results in Canada, where it has been expanding, also came in below expectations.

Target is under considerable pressure to rebuild brand trust. “As we plan for the new fiscal year, we will continue to work tirelessly to win back the confidence of our guests and deliver irresistible merchandise and offers, and we are encouraged that sales trends have improved in recent weeks,” says Steinhafel.

The brand is definitely recovering among consumers, but still has a ways to go. Its buzz score on the latest YouGov BrandIndex ranking is 6; in the weeks before the breach,  it had been as high as 40. As news of the breach spread, and in the subsequent wave of public and congressional scrutiny about Target’s reaction, it sank below zero, moving back into positive territory around Valentine’s Day, says a spokesperson for the index.

Target, which says it had expenses of $17 million in the quarter related to the breach, says it is still unable to estimate the future expenses it may incur as the result of the data theft. One of the criticisms leveled at Target throughout the episode is its constant upward revision of the number of shoppers whose information was compromised. Initially, it said it expected 40 million were affected. The estimate now includes up to 70 million Americans.

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