Minneapolis – Target Corp. saw dramatic year-over-year declines in its net earnings for the fourth quarter and fiscal year 2013, as the negative impact of its massive data breach and damages from its Canadian operations took effect. The chain warned that continuing costs related to the breach may affect its profits in the first quarter of fiscal 2014.
Target’s profit in the fourth quarter fell 46% to $520 million, slightly beating projections, from $961 million in the year-ago period. The breach resulted in $17 million of net expenses in the fourth quarter, Target said, with $61 million of total expenses partially offset by the recognition of a $44 million insurance receivable.
For the full fiscal year, earnings dropped 34% to $1.97 billion from about $3 billion versus last year.
Net earnings for the fourth quarter still managed to slightly beat analyst projections. Target warned
Total revenues did not fall as significantly. For the quarter, Target reported total revenues of $21.51 billion, down about 5% from $22.52 billion. Same-store sales fell 2.5%.
For the fiscal year, total revenues declined 1% to $72.6 billion from $73.3 billion.
Target said that its fourth quarter performance notably dropped after the Dec. 19, 2013 announcement of its data breach, ending what had been a strong holiday season. In addition, efforts to clear excess inventory from Canadian stores also affected results.
Target said on Wednesday it may have to incur costs tied to reissuing cards, lawsuits, governmental investigations and enforcement proceedings, legal expenses, investigative and consulting fees, and capital investments, among other things.
“For more than 50 years, Target has succeeded by focusing on our guests,” said Gregg Steinhafel, chairman, president and CEO of Target Corp. “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 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.”