Target, targeted by a malicious data breach in December 2013, must now pay the bill for being victimized in the case.
The company announced its second quarter financial results will likely include gross expenses of $148 million emanating from the data breach. There will be an offset, though, of $38 million through insurance payments, approximately 25 percent of the total.
Target is the third-largest U.S. retailer, with 1,925 stores; 1,795 in the U.S., 130 in Canada.
"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, interim president and CEO, CFO of Target Corp. "With the benefit of additional information, we believe that today is an appropriate time to provide greater clarity on this topic."
The data breach took place when an intruder gained unauthorized access to its network and stole certain payment card and other guest information.
The expense estimate includes an increase for the accrual for estimated probable losses for what will be most likely the majority of actual and potential breach-related claims, including claims submitted by payment card providers.
The estimate does not include, however, unforeseen related legal, consulting or administrative fees, which at this time cannot be affixed to any quarterly estimate.
All of this being said, the data breach expenses only amount to .2 percent of Target's 2013 revenue of $72.576 billion.
What really is troubling the company is its co-announcement that Wall Street should get its hopes down about the company's forthcoming second quarter financials.
Referencing flat U.S. sales and a soft Canadian market, Target says it is looking at an adjusted earnings per share (EPS) of approximately $0.78, well under the $0.85-$1.00 that it rosily predicted.
Interim president/CEO Mulligan addressed the underwhelming financials by stating that "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. 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."
Cornell's most recent experience was as CEO of PepsiCo Americas Foods, the largest of PepsiCo's four divisions. He is expected to, among other things, to lead Target's transformation into a top omnichannel retailer.
