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That Data Breach Hurt Target (TGT) More Than It Hurt You

NEW YORK (TheStreet) -- Target (TGT - Get Report) learned a very expensive lesson after a massive data breach of the private information of millions of its customers almost halved fourth-quarter profit.

Over the three months to Feb. 1, the retailer earned $520 million, or 81 cents a share, down from $961 million, or $1.47 a share, in the year-ago quarter.

Revenue fell 5% to $21.5 billion, while U.S. comparable-store sales decreased 2.5%, consistent with prior guidance and a tick wider than analysts' expectations of a 2.4% decline. The company said it saw "meaningfully softer" sales following the announcement of the data breach on Dec. 19.

And the pain isn't over yet. Target said it is not able to estimate future expenses related to the breach, which saw around 40 million credit and debit cards and 70 million other records containing personal customer information compromised.

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Potential expenses include claims for counterfeit fraud losses, card re-issuance expenses, civil litigation, governmental investigations, and legal and consulting fees.

"These costs may have a material adverse effect on Target's results of operations in first quarter and full-year 2014 and future periods," the company said in the statement.

For the current quarter, management said it expects adjusted earnings of between 60 cents and 75 cents a share and full-year earnings of $3.85 to $4.15 a share. Analysts surveyed by Thomson Reuters forecast 85 cents and $4.15 a share, respectively.

Wall Street doesn't seem fazed by higher expenses and lower earnings, though. By midmorning, Target shares had added 3.5% to $58.47.

Quarterly adjusted earnings of $1.30 a share beat consensus by 51 cents and total sales were $69.2 million higher than expected.

Also See: Target Reports Q4 and FY Results

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TheStreet Ratings team rates TARGET CORP as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate TARGET CORP (TGT) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

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