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Does Target's CEO Departure Signal 1Q Earnings Pain?

NEW YORK (TheStreet) - Target (TGT) made big news on Monday when it announced that its CEO Gregg Steinhafel  was forced to resign as the reverberations from last year's data breach continue to rock the retailer.

But what does that mean for Target's first-quarter earnings?

For the moment, Target's CFO John Mulligan has been appointed interim president and CEO while board member Roxanne S. Austin will take on the position of interim non-executive chairwoman. The Minneapolis-based company said both executives will remain in their new roles until permanent replacements are announced.

So, now that all the top executive positions are covered, we're left to determine why all of this unfolded. One explanation says that the company has never really dealt with the data spill, and that finally, something had to be done.

Target "likely thought they could ride out their initial malaise in action, but the anger, resentment and pocketbook disobedience by customers called for a dramatic public symbol -- and out came the target guillotine," Eric Schiffer, chairman of ReputationManagementConsultants.com, an Irvine, California-based brand agency, said in an e-mail. Schiffer added that it's "highly probable" the company's second quarter earnings will fall below expectations.

The massive data breach over the holiday season may have affected as many as 110 million customers. It most certainly did generate lots of negative headlines. For Target's fourth-quarter earnings, Steinhafel had said that while sales had started to recover, the data breach had "shaken" customers' confidence in the store. Of course, it apparently also shook the board's confidence in Steinhafel.

"Target has not emotionally reconnected with customers, there is still this sense of worrying unknown each time a card is swiped," Brian Sozzi, CEO of Belus Capital Advisors and a contributor to TheStreet, writes in an email. "I expect pain within Target's earnings for the first quarter. I just don't think you could expect that recovery type quarter given the news flow over the past months."

Target is set to report first-quarter earnings on May 21.

Analysts, according to Thomson Reuters, expect the company's first-quarter earnings to fall 12% to 72 cents a share. Revenue is expected to rise 2% to $17.04 billion. The company said in February that it expected first-quarter sales comps to be flat to down 2%. But with a particularly difficult winter keeping consumers at home, it's likely that Target suffered even more given customer reluctance to shop there.

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. Analysts had expected 79 cents a share, according to Yahoo! Finance.

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