Target cuts profit estimate as data breach costs rise
Target Corp cut its second-quarter earnings estimate due to a significant rise in costs related to a data breach last year and higher promotions and discounts to lure customers in North America.
The third-largest U.S. retailer also warned of weak sales in the United States and Canada, sending its shares down 3.7 percent to $58.48 in early trading on Tuesday.
The company has been struggling to move past a devastating data breach during the 2013 holiday season, in which hackers stole at least 40 million payment card numbers and 70 million other data.
The bleak forecast comes less than a week after Target named former PepsiCo Inc and Wal-Mart Stores Inc executive Brian Cornell as its chief executive as it tries to regain customer confidence.
Target on Tuesday said it incurred $111 million in net pre-tax expenses in the second quarter ended July with respect to the breach. That was much higher than the $26 million incurred till the first quarter.
U.S. same-store sales were flat in the second quarter, as customers continued to pull back spending, the company said in a statement.
Target also said sales were weak in Canada. The company lost nearly $1 billion last year in the country due to a botched expansion plan.
The company also said it incurred $285 million in pre-tax losses in the quarter, due to an early retirement of $725 million of its long-term debt.
Target estimated adjusted earnings of about 78 cents per share for the second quarter, lower than its prior forecast of 85 cents to $1.00 per share.
Analysts on average were expecting a profit of 91 cents per share, according to Thomson Reuters I/B/E/S.
Up to Monday's close of $60.70, Target shares had fallen 15.7 percent in the past year.