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Target 1Q profit falls 16 pct as breach takes toll

KDWN

NEW YORK (AP) — Target cut its annual profit outlook Wednesday and said its first-quarter earnings fell 16 percent as it took another hit from a massive customer data breach and a troubled expansion in Canada.

The third-largest U.S. retailer, based in Minneapolis, also issued a second-quarter profit projection below analysts’ expectations.

Target also said it doesn’t expect its six straight quarters of traffic declines to reverse this year in what analysts say is the most tumultuous time in its history.

Still, there are some encouraging signs. A key revenue metric improved after tumbling shortly after the data breach, which compromised the credit card and personal information of millions of customers and exposed big security flaws.

But Target accomplished that by stepping up discounts, such as offering five 12-packs of Coke products for $10, its lowest price in more than a decade. Such heavy discounting squeezed profit margins in the quarter.

The news comes a day after the retailer fired the president of its troubled Canadian operation and two weeks after the abrupt departure of Target CEO Gregg Steinhafel.

Chief Financial Officer John Mulligan took over as acting CEO while Target searches for a new permanent leader.

In the meantime, Mulligan outlined three priorities: revitalizing Target’s U.S. business by constantly testing new products; becoming a digital leader to cater to shoppers jumping back and forth from online to physical stores; and improving operations in Canada.

“We need to listen to all of them (shoppers), how they’re feeling, what they want and how well we’re serving them,” Mulligan told investors Wednesday.

Still, whoever takes over the permanent reins of Target will have to contend with not only Target’s specific issues but also broader challenges affecting the retail industry.

Stores, particularly those that cater to the low- to middle-income customers, are wrestling with a slowly recovering economy that’s not benefiting all Americans equally. Retailers also face a shifting landscape where mobile shoppers want more flexibility in where and how they buy.

But Target’s problems run deep.

Target, known for its cheap chic fashions and home accessories, was a darling in retailing up until the Great Recession, but was knocked off its perch. Rivals have copied its strategy of teaming up with designers for affordable collections.

At the same time, Target hasn’t been able to ditch the perception that its prices on staples are much higher than other discounters like Wal-Mart.

Target also faces uncertainty about costs related to the pre-Christmas data breach. The company said that it incurred $18 million of net expense in the first quarter of 2014, reflecting $26 million of expenses partly offset by the recognition of $8 million in expected insurance reimbursement.

Those costs, however, do not include potential claims by the payment card networks for fraud losses tied to the breach. The company said it was unable to estimate future expenses related to the data breach.

The company has responded to the breach by overhauling security and technology. The company has also been accelerating its $100 million plan to roll out chip-based credit card technology, which is considered more secure, in all of its nearly 1,800 stores.

As for Canada, the company needs to fix inventory shortages and other problems. On Tuesday, Target announced it replaced Tony Fisher with 15-year company veteran Mark Schindele, who was senior vice president of merchandising operations.

“We have not lived up to our potential or expectations over the last year and a half,” he told reporters, referring to Canada.

As for catering to tech-savvy shoppers, Target has been slow to embrace the new landscape. But Mulligan said Target will move more quickly to test online shopping programs and get them into broad use. In fact, Target will test $10 rush delivery in June in the Minneapolis, Boston and Miami markets, offering customers the ability to order as late as 1:30 p.m. and receive a delivery of qualifying items between 6 p.m. and 9 p.m.

The first-quarter results show Target still has a lot of work to do.

Target says it earned $418 million, or 66 cents per share, in the quarter ended May 3. That compares with $498 million, or 77 cents per share, a year earlier.

Adjusted earnings results were 70 cents per share.

Revenue rose 2.1 percent to $17.1 billion.

Analysts had expected profit of 71 cents on revenue of $16.97 billion.

Revenue at stores open at least a year slipped 0.3 percent, better than the 2.5 percent drop in the fourth quarter. Customer traffic fell 2 percent in the quarter, offset by a 2.1 percent increase in the average transaction amount.

Target said it expects second-quarter earnings per share between 85 cents and $1, given the costs that the company faces. Analysts had expected $1.02 per share.

It also said it now expects earnings per share for the full year to be $3.60 to $3.90. That’s down from previous guidance of $3.85 to $4.15 per share. Analysts had expected $3.99.

Shares rose 31 cents to $56.92 Wednesday. The stock is down 10.5 percent so far this year.

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Follow Anne D’Innocenzio at http://www.Twitter.com/adinnocenzio

Target 1Q profit falls 16 pct as breach takes toll

KDWN

NEW YORK (AP) — Target cut its annual profit outlook Wednesday and said its first-quarter earnings fell 16 percent as it took another hit from a massive customer data breach and a troubled expansion in Canada.

The third-largest U.S. retailer, based in Minneapolis, also issued a second-quarter projection that was below analysts’ expectations.

Still, there were some encouraging signs. Target said that it saw significant improvement in a key revenue metric after the drop it experienced shortly after the data breach that compromised the credit card and personal information of millions of customers and exposed big security flaws.

The news comes a day after the retailer fired the president of its troubled Canadian operation and two weeks after the abrupt departure of Target CEO Gregg Steinhafel.

Chief Financial Officer John Mulligan took over as acting CEO while Target searches for a new permanent leader. The company said its search includes candidates outside the company and the industry.

Mulligan said in a statement that Target is starting to recover from the data breach, and things are improving in Canada. “While we are pleased with this momentum, we need to move more quickly,” he added.

Target, known for its cheap chic fashions and home accessories, used to be a darling in retailing up until the Great Recession, but it has been knocked off its perch. Now, it’s facing one of the most tumultuous times in its history.

Target is cleaning house as it fixes its operations in Canada, its first foray outside the U.S., while revitalizing business in the U.S. amid heavy competition.

Rivals have copied its strategy for teaming up with designers for affordable collections, leaving Target’s merchandise looking stale. At the same time, Target hasn’t been able to ditch the image that its prices on staples are much higher than other discounters like Wal-Mart.

At the same time, Target faces uncertainty about costs related to the pre-Christmas data breach. The company said that it incurred $18 million of net expense in the first quarter of 2014, reflecting $26 million of expenses partially offset by the recognition of $8 million in expected insurance reimbursement.

The costs, however, do not include potential claims by the payment card networks for fraud losses tied to the breach. The company said it was unable to estimate future expenses related to the data breach.

In the wake of the breach, the company has been making changes, including overhauling security and technology. The company has also been accelerating its $100 million plan to roll out chip-based credit card technology, which is considered more secure, in all of its nearly 1,800 stores.

All of Target’s challenges come as the broader retail industry is dealing with a slow economic recovery that hasn’t benefited all American equally and a move by shoppers away from buying in stores and toward shopping online. Target’s middle-income shoppers have average household income of about $65,000, estimates Craig Johnson, president of consultancy Customer Growth Partners.

In a conference call with the media on Wednesday, Mulligan outlined three top priorities: revitalizing Target’s U.S. business, improving operations in Canada and making Target a leader in digital transformation.

In the U.S., Target said that it’s doing more testing of unique products in the stores.

“We are working very hard to accelerate newness,” he added.

As for Canada, the company announced on Tuesday that it replaced Tony Fisher with 15-year company veteran Mark Schindele, who was senior vice president of merchandising operations.

“We have not lived up to our potential or expectations over the last year and a half,” he told reporters, referring to Canada.

Mulligan also told reporters that Target needs to cater to shoppers who don’t want any barriers as they look to seamlessly jump from the web to its physical stores. In fact, the company just started allowing shoppers to order online and pick up at the stores. Rivals like Sears and Wal-Mart have been doing it for years.

The first-quarter results show Target still has a lot of work to do.

Target says it earned $418 million, or 66 cents per share, in the quarter ended May 3. That compares with $498 million, or 77 cents per share, a year earlier.

Adjusted earnings results were 70 cents per share.

Revenue rose 2.1 percent to $17.1 billion.

Analysts had expected profit of 71 cents on revenue of $16.97 billion.

Revenue at stores open at least a year slipped 0.3 percent, an improvement from the 2.5 percent drop in the fourth quarter. Customer traffic fell 2 percent in the quarter, offset by a 2.1 percent increase in the average transaction amount.

Target said it expects second-quarter earnings per share between 85 cents and $1, given the costs that the company faces. Analysts had expected $1.02 per share.

It also said it now expects earnings per share for the full year to be $3.60 to $3.90. That’s down from previous guidance of $3.85 to $4.15 per share. Analysts had expected $3.99.

—————-

Follow Anne D’Innocenzio at http://www.Twitter.com/adinnocenzio

Target 1Q profit falls 16 pct as breach takes toll

KDWN

NEW YORK (AP) — Target cut its annual profit outlook Wednesday and said its first-quarter earnings fell 16 percent as it took another hit from a massive customer data breach and a troubled expansion in Canada.

The third-largest U.S. retailer, based in Minneapolis, also issued a second-quarter projection that was below analysts’ expectations.

Still, there were some encouraging signs. Target said that it saw significant improvement in a key revenue metric after the drop it experienced shortly after the data breach that compromised the credit card and personal information of millions of customers and exposed big security flaws.

The news comes a day after the retailer fired the president of its troubled Canadian operation and two weeks after the abrupt departure of Target CEO Gregg Steinhafel.

Chief Financial Officer John Mulligan took over as acting CEO while Target searches for a new permanent leader. The company said its search includes candidates outside the company and the industry.

Mulligan said in a statement that Target is starting to recover from the data breach, and things are improving in Canada. “While we are pleased with this momentum, we need to move more quickly,” he added.

Target, known for its cheap chic fashions and home accessories, used to be a darling in retailing up until the Great Recession, but it has been knocked off its perch. Now, it’s facing one of the most tumultuous times in its history.

Target is cleaning house as it fixes its operations in Canada, its first foray outside the U.S., while revitalizing business in the U.S. amid heavy competition.

Rivals have copied its strategy for teaming up with designers for affordable collections, leaving Target’s merchandise looking stale. At the same time, Target hasn’t been able to ditch the image that its prices on staples are much higher than other discounters like Wal-Mart.

At the same time, Target faces uncertainty about costs related to the pre-Christmas data breach. The company said that it incurred $18 million of net expense in the first quarter of 2014, reflecting $26 million of expenses partially offset by the recognition of $8 million in expected insurance reimbursement.

The costs, however, do not include potential claims by the payment card networks for fraud losses tied to the breach. The company said it was unable to estimate future expenses related to the data breach.

In the wake of the breach, the company has been making changes, including overhauling security and technology. The company has also been accelerating its $100 million plan to roll out chip-based credit card technology, which is considered more secure, in all of its nearly 1,800 stores.

All of Target’s challenges come as the broader retail industry is dealing with a slow economic recovery that hasn’t benefited all American equally and a move by shoppers away from buying in stores and toward shopping online. Target’s middle-income shoppers have average household income of about $65,000, estimates Craig Johnson, president of consultancy Customer Growth Partners.

In a conference call with the media on Wednesday, Mulligan outlined three top priorities: revitalizing Target’s U.S. business, improving operations in Canada and making Target a leader in digital transformation.

In the U.S., Target said that it’s doing more testing of unique products in the stores.

“We are working very hard to accelerate newness,” he added.

As for Canada, the company announced on Tuesday that it replaced Tony Fisher with 15-year company veteran Mark Schindele, who was senior vice president of merchandising operations.

“We have not lived up to our potential or expectations over the last year and a half,” he told reporters, referring to Canada.

Mulligan also told reporters that Target needs to cater to shoppers who don’t want any barriers as they look to seamlessly jump from the web to its physical stores. In fact, the company just started allowing shoppers to order online and pick up at the stores. Rivals like Sears and Wal-Mart have been doing it for years.

The first-quarter results show Target still has a lot of work to do.

Target says it earned $418 million, or 66 cents per share, in the quarter ended May 3. That compares with $498 million, or 77 cents per share, a year earlier.

Adjusted earnings results were 70 cents per share.

Revenue rose 2.1 percent to $17.1 billion.

Analysts had expected profit of 71 cents on revenue of $16.97 billion.

Revenue at stores open at least a year slipped 0.3 percent, an improvement from the 2.5 percent drop in the fourth quarter. Customer traffic fell 2 percent in the quarter, offset by a 2.1 percent increase in the average transaction amount.

Target said it expects second-quarter earnings per share between 85 cents and $1, given the costs that the company faces. Analysts had expected $1.02 per share.

It also said it now expects earnings per share for the full year to be $3.60 to $3.90. That’s down from previous guidance of $3.85 to $4.15 per share. Analysts had expected $3.99.

—————-

Follow Anne D’Innocenzio at http://www.Twitter.com/adinnocenzio

Target 1Q profit falls 16 pct as breach takes toll

KDWN

NEW YORK (AP) — Target cut its annual profit outlook Wednesday and said its first-quarter earnings fell 16 percent as it took another hit from a massive customer data breach and a troubled expansion in Canada.

The third-largest U.S. retailer, based in Minneapolis, also issued a second-quarter projection that was below analysts’ expectations.

Still, there were some encouraging signs. Target said that it saw significant improvement in a key revenue metric after the drop it experienced shortly after the data breach that compromised the credit card and personal information of millions of customers and exposed big security flaws.

The news comes a day after the retailer fired the president of its troubled Canadian operation and two weeks after the abrupt departure of Target CEO Gregg Steinhafel.

Chief Financial Officer John Mulligan took over as acting CEO while Target searches for a new permanent leader. The company said its search includes candidates outside the company and the industry.

Mulligan said in a statement that Target is starting to recover from the data breach, and things are improving in Canada. “While we are pleased with this momentum, we need to move more quickly,” he added.

Target, known for its cheap chic fashions and home accessories, used to be a darling in retailing up until the Great Recession, but it has been knocked off its perch. Now, it’s facing one of the most tumultuous times in its history.

Target is cleaning house as it fixes its operations in Canada, its first foray outside the U.S., while revitalizing business in the U.S. amid heavy competition.

Rivals have copied its strategy for teaming up with designers for affordable collections, leaving Target’s merchandise looking stale. At the same time, Target hasn’t been able to ditch the image that its prices on staples are much higher than other discounters like Wal-Mart.

At the same time, Target faces uncertainty about costs related to the pre-Christmas data breach. The company said that it incurred $18 million of net expense in the first quarter of 2014, reflecting $26 million of expenses partially offset by the recognition of $8 million in expected insurance reimbursement.

The costs, however, do not include potential claims by the payment card networks for fraud losses tied to the breach. The company said it was unable to estimate future expenses related to the data breach.

In the wake of the breach, the company has been making changes, including overhauling security and technology. The company has also been accelerating its $100 million plan to roll out chip-based credit card technology, which is considered more secure, in all of its nearly 1,800 stores.

All of Target’s challenges come as the broader retail industry is dealing with a slow economic recovery that hasn’t benefited all American equally and a move by shoppers away from buying in stores and toward shopping online. Target’s middle-income shoppers have average household income of about $65,000, estimates Craig Johnson, president of consultancy Customer Growth Partners.

In a conference call with the media on Wednesday, Mulligan outlined three top priorities: revitalizing Target’s U.S. business, improving operations in Canada and making Target a leader in digital transformation.

In the U.S., Target said that it’s doing more testing of unique products in the stores.

“We are working very hard to accelerate newness,” he added.

As for Canada, the company announced on Tuesday that it replaced Tony Fisher with 15-year company veteran Mark Schindele, who was senior vice president of merchandising operations.

“We have not lived up to our potential or expectations over the last year and a half,” he told reporters, referring to Canada.

Mulligan also told reporters that Target needs to cater to shoppers who don’t want any barriers as they look to seamlessly jump from the web to its physical stores. In fact, the company just started allowing shoppers to order online and pick up at the stores. Rivals like Sears and Wal-Mart have been doing it for years.

The first-quarter results show Target still has a lot of work to do.

Target says it earned $418 million, or 66 cents per share, in the quarter ended May 3. That compares with $498 million, or 77 cents per share, a year earlier.

Adjusted earnings results were 70 cents per share.

Revenue rose 2.1 percent to $17.1 billion.

Analysts had expected profit of 71 cents on revenue of $16.97 billion.

Revenue at stores open at least a year slipped 0.3 percent, an improvement from the 2.5 percent drop in the fourth quarter. Customer traffic fell 2 percent in the quarter, offset by a 2.1 percent increase in the average transaction amount.

Target said it expects second-quarter earnings per share between 85 cents and $1, given the costs that the company faces. Analysts had expected $1.02 per share.

It also said it now expects earnings per share for the full year to be $3.60 to $3.90. That’s down from previous guidance of $3.85 to $4.15 per share. Analysts had expected $3.99.

—————-

Follow Anne D’Innocenzio at http://www.Twitter.com/adinnocenzio

Target 1Q profit falls 16 pct as breach takes toll

KDWN

NEW YORK (AP) — Target reported a 16 percent drop in first-quarter earnings as a massive customer data breach and a troubled expansion in Canada continue to batter the retailer.

The third-largest U.S. retailer, based in Minneapolis, also cut its annual profit outlook and issued a second-quarter projection that was below analysts’ expectations.

Still, there were some encouraging signs. Target said that it saw significant improvement in a key revenue metric from what it experienced shortly after the data breach that compromised the credit card and personal information of millions of customers and exposed big security flaws.

The news comes a day after the retailer fired the president of its troubled Canadian operation and two weeks after the abrupt departure of Target CEO Gregg Steinhafel.

Chief Financial Officer John Mulligan took over as acting CEO while Target searches for a new permanent leader. The company said its search includes candidates outside the company and the industry.

Mulligan said in a statement that Target is starting to recover from the data breach, and things are improving in Canada. “While we are pleased with this momentum, we need to move more quickly.”

Target, known for its cheap chic fashions and home accessories, used to be a darling in retailing, but now it is facing one of the most tumultuous times in its history.

Target is trying to clean house as it fixes its operations in Canada, its first foray outside the U.S., while revitalizing business in the U.S. amid heavy competition.

At the same time, Target faces uncertainty about costs related to the pre-Christmas data breach. The company said that it incurred $18 million of net expense in the first quarter of 2014, reflecting $26 million of expenses partially offset by the recognition of $8 million in expected insurance reimbursement.

The costs, however, do not include potential claims by the payment card networks for fraud losses tied to the breach. The company said it was unable to estimate future expenses related to the data breach.

All of Target’s challenges come as the broader retail industry is dealing with a slow economic recovery that hasn’t benefited all American equally and a move by shoppers away from buying in stores and toward shopping online.

The results show Target still has a lot of work to do.

Target says it earned $418 million, or 66 cents per share, in the quarter ended May 3. That compares with $498 million, or 77 cents per share, a year earlier.

Adjusted earnings results were 70 cents per share.

Revenue rose 2.1 percent to $17.1 billion.

Analysts had expected profit of 71 cents on revenue of $16.97 billion.

Revenue at stores open at least a year slipped 0.3 percent, an improvement from the 2.5 percent drop in the fourth quarter.

In the wake of the breach, the company has been making changes, including overhauling some of its divisions that handle security and technology. The company has also been accelerating its $100 million plan to roll out chip-based credit card technology in all of its nearly 1,800 stores.

The company’s aggressive expansion into Canada, with more than 100 stores in the last year, remains a headache. Shoppers have complained that the prices are too high and the company has had inventory problems. Experts also say that Target paid too much for some of the locations. That resulted in a loss of nearly a billion dollars in the first year of operations.

For the first quarter, the Canadian segment generated sales of $393 million, below Wall Street estimates of $432 million. Gross profit margin rate was 18.7 percent, reflecting Target’s move to clear out excess inventory.

Target said it expects second-quarter earnings per share between 85 cents and $1, given the costs that the company faces. Analysts had expected $1.02 per share.

It also said it now expects earnings per share for the full year to be $3.60 to $3.90. That’s down from previous guidance of $3.85 to $4.15 per share. Analysts had expected $3.99.

Target 1Q profit falls 16 pct as breach takes toll

KDWN

NEW YORK (AP) — Target is reporting a 16 percent drop in first-quarter earnings as a massive customer data breach and troubled expansion plans in Canada continue to batter the retailer.

The third-largest U.S. retailer also reduced its annual profit outlook.

The news comes a day after the retailer fired the president of its troubled Canadian operation and two weeks after the abrupt departure of its CEO.

Target says it earned $418 million, or 66 cents per share, in the quarter ended May 3. That compares with $498 million, or 77 cents per share, a year earlier.

Adjusted earnings were 70 cents per share.

Revenue rose 2.1 percent to $17.1 billion.

Analysts had expected earnings of 71 cents on revenue of $16.97 billion.