8/05/14

How much has Target’s data breach cost the retailer?

Plenty. Its second quarter breach-related expenses cost the retailer more than all but 178 retailers in the 2014 Top 500 Guide sold online throughout all of last year.

Zak Stambor , Managing Editor

$148 million. That’s how much Target Corp.’s fourth quarter data breach-related expenses cost the multichannel retailer in the fiscal second quarter, which ended Saturday. That’s on top of the $88 million worth of expenses the retailer incurred in the first quarter.

To put the $236 million in breach-related costs in perspective, that amount is more than all but 123 retailers in the 2014 Top 500 Guide sold online throughout all of last year.

The second quarter expenses were partially offset by $38 million insurance protection, just as it received $52 million in insurance reimbursement in the first quarter. That leaves the net cost to date at $146 million.

Despite the significant second-quarter expenses, Matt Nemer, senior analyst at Wells Fargo, says that the costs were significantly below many experts’ expectations. “Some had initially feared [the costs] could be as high as $1 billion.”

Even with lower-than-expected costs, the retailer today lowered its outlook for the second quarter because of the breach-related expenses, as well as softer-than-expected sales. Target, No. 18 in the Internet Retailer 2014 Top 500 Guide, says it now expects to earn around 78 cents a share, down from a range of 85 cents to $1 per share.

“While the environment in both the U.S. and Canada continues to be challenging, and results aren’t yet where they need to be, we are making progress in our efforts to drive U.S. traffic and sales, improve our Canadian operations and advance Target’s digital transformation,” says John Mulligan, interim president and CEO, chief financial officer.

The retailer has been reeling since it suffered a data breach that exposed the credit or debit card details of 40 million customers and other personal information of 70 million shoppers. Those struggles led the retailer to shake up its executive ranks all the way up to CEO. Target last week hired Brian Cornell as its next CEO and chairman of the board of directors. He replaced Gregg Steinhafel, who resigned as CEO  in May.

Since the breach, Target has also hired former Gilt Group Inc. executive Peter Glusker to lead its business integration and operations division, put Target veteran Mark Schindele in charge of Target’s 127 Canadian stores and hired Alan Wizemann, founder of e-commerce software provider ShopIgniter, to lead digital teams as vice president of Target.com and mobile product.

Topics:

E-Payments & Security, Target, Target data breach, Top 500 U.S. E-retailers

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