Massive Target breach could have lasting effects

Published on NewsOK Modified: January 10, 2014 at 6:33 pm •  Published: January 10, 2014
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Target investors have been largely unmoved by the company's disclosures. Target's stock, while volatile, has traded at about $63 since news of the breach leaked on Dec. 18. It slipped just 72 cents, or more than 1 percent, to $62.62 in trading Friday.

But some observers believe the stock could get battered if consumers stay away from Target stores. Several Wall Street analysts downgraded their earnings forecasts for the retailer on Friday.

Colleen McCarthy, 26, of Cleveland, Ohio, is among those who are avoiding Target. McCarthy used her Chase debit card at a local Target on the Friday after Thanksgiving and received a notice from Chase a few days after news of the breach first broke. The letter identified her as a potential victim of the Target breach but said, "don't worry." At the time, she was only somewhat concerned.

But Monday night McCarthy received a call from Chase, alerting her that someone tried to use her debit account twice in Michigan. The thief cleared $150, which caused her rent check to bounce. Chase restored the money to her account. "This has been a nightmare," she said. "My rent check bounced. My debit card had to be canceled. And who's to say what other people have access to my information?"

Target tried to woo scared shoppers back to stores on the last weekend before Christmas with a 10 percent discount on nearly everything in its stores. Target is also offering a year of free credit monitoring and identity theft protection to customers that shopped at its stores.

Still, some experts believe the company should do more.

"Target is in a critical situation with consumers because its credibility and brand loyalty are being questioned," said David E. Johnson, CEO of Strategic Vision, LLC, which specializes in crisis communications. "Right now, investors think Target can weather the storm. But the longer it gets worse, the worse it is for Target."

Johnson says Target needs to rebuild shoppers' trust. He believes Target needs to air TV commercials assuring them that it's safe to shop in its stores. It also should offer more incentives like deeper discounts to woo consumers, Johnson said.

Clearly, Target shoppers were scared off during the holiday season, when stores can make roughly 20 percent to 40 percent of their annual revenue.

The Minneapolis company also said that it now foresees fourth-quarter sales at stores open at least a year will be down about 2.5 percent. It previously predicted those sales would be about flat.

This figure is a closely-watched indicator of a retailer's health.

Target cautioned that its fourth-quarter financials may include charges related to the data breach. The chain said the costs tied to the breach may have a material adverse effect on its quarterly results as well as future periods.

The company has 1,921 stores, with 1,797 locations in the U.S. and 124 in Canada.

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AP Business Writer Bree Fowler in New York contributed to this report.

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