Target Warning Rings True: Q4 Was Meaningfully Weak

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Target (NYSE:TGT) warned investors that December’s data breach would hurt fourth-quarter results, and management was right. For the three-month period that included the consumer spending-heavy holiday season, the retailer’s net profit almost halved as a result of the massive data breach that affected tens of millions of customers. The company also warned that the fallout resulting from the incident could even hurt future profits. Yet Target did manage to top the profit expectations of Wall Street, a sign that the second-largest U.S. discount retailer has started to regain customer loyalty.

“For more than 50 years Target has succeeded by focusing on our guests,” Target CEO Gregg Steinhafel said in the earnings press release. “During the first half of the fourth quarter, our guest-focused holiday merchandising and marketing plans drove better-than-expected sales. However, results softened meaningfully following our December announcement of a data breach.”

As part of Steinhafel’s efforts to draw shoppers back into stores after it was revealed that hackers stole the personal data and credit card information of millions of customers, Target offered weekend of 10 percent discounts in December and a year of free credit monitoring. The chief executive believes those efforts have begun to pay off. “As we plan for the new fiscal year, we will continue to work tirelessly to win back the confidence of our guests and deliver irresistible merchandise and offers, and we are encouraged that sales trends have improved in recent weeks,” he said.

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