Just a few days after naming a new CEO, Target issued a preliminary update on its second-quarter expenses related, in part, to the December 2013 data breach.
The company’s financial results are expected to include gross expenses of $148 million, partially offset by a $38 million insurance receivable, related to the 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, 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.”
The environment in the U.S. and Canada continues to be challenging for Target. Mulligan added that results aren’t yet where they need to be, but was optimistic about the company’s progress, particularly in its efforts to drive U.S. traffic and sales, improve its Canadian operations and advance its 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 and committed to working together to accelerate Target’s transformation and become a leading omnichannel retailer,” Mulligan said.
The company now anticipates its second quarter 2014 adjusted earnings per share (EPS) will be within a range around $0.78, compared with prior guidance of $0.85 to $1.00 per share, reflecting flat comparable sales in its U.S. segment, with lower-than-expected EBITDA margin driven by promotional markdowns, as guests continue to spend cautiously and focus on value in the current environment; as well as softer-than-expected sales in its Canadian segment, combined with the impact of continued investments to clear excess inventory.
The company will provide complete second-quarter results August 20.