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Target Corp. has adjusted down its second quarter 2014 earnings in response to, among othe factors, expenses related to last year's data breach that exposed millions of shoppers' personal information.
The Minneapolis-based retailer now anticipates its Q2 adjusted earnings per share to be around 78 cents, compared to prior guidance of 85 cents to $1. In addition to breach-related expenses of $111 million, the adjustment reflects flat comparable U.S. sales, softer-than-expected Canadian sales, early debt retirement losses and other expenses.
Overall, Target's Q2 results are expected to include gross expenses of $148 million, partially offset by a $38 million insurance receivable, related to the December 2013 data breach. These expenses include an increase to the accrual for estimated probable losses for what the company believes to be the vast majority of actual and potential breach-related claims, including claims by payment card networks.
“Since the data breach last December, we have been focused on providing clarity on the company’s estimated financial exposure to breach-related claims,” said John Mulligan, Target's interim president and CEO/CFO. “With the benefit of additional information, we believe that today is an appropriate time to provide greater clarity on this topic.
“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,” Mulligan continued. “With last week’s announcement that the board has chosen Brian Cornell as Target’s next chairman and CEO, we are excited to welcome Brian to the team and committed to working together to accelerate Target’s transformation and become a leading omnichannel retailer.”
Target operates 1,925 stores in the United States and Canada.