Time for Smart Cards
By John Mulligan, executive VP and CFO, Target
The data breach that struck our company spotlighted the sophistication of criminal hacker networks operating across the globe. We know the attack created significant concerns for millions of customers. We will learn from this incident and we will work to make Target, and the wider business community, more secure in the future.
One step American businesses could now take that would dramatically improve the security of all credit and debit cards: adoption of chip-enabled smartcards.
The technology is already widely used throughout the world. For many reasons, the United States has been slow to embrace the technology at home. We need to change.
At Target, we’ve been working for years towards adoption of this technology. Since the breach, we are accelerating our own $100 million investment to put chip-enabled technology in place. Our goal: implement this technology in our stores and on our proprietary REDcards by early 2015, more than six months ahead of our previous plan.
Nothing is more important to Target than our customers. We are who we are because of their trust and loyalty. That is why it is so important to move forward with a more secure technology.
For consumers, this technology differs in important ways from what is widely used in the United States today. The standard credit and debit cards we use now have a magnetic stripe containing the customer’s information. When first introduced, that stripe was an innovation. But in today’s world, more is needed.
Chip-enabled smart cards contain a tiny microprocessor chip that encrypts transaction data shared with sales terminals used by merchants. As a result, even if the card number is stolen in a data breach, the thieves cannot counterfeit the card.
In addition, requiring the use of a four-digit personal identification number (PIN) to complete a sales transaction would provide even greater safety.To be frank, there is no consensus across the business community on the use of PINs in conjunction with chip-enabled cards. But Target supports the goal and will work toward adoption of the practice in our own stores and more widely.
Target is also investing in solutions that will make mobile transactions more secure, we hope in the near future. And we know work is needed to strengthen protections for e-commerce, an important long-term goal. In the meantime, adopting chip-enabled cards would be a clear step in the right direction.
In the United Kingdom, where smart card technology is widely used, financial losses associated with lost or stolen cards are at their lowest levels since 1999 and have fallen by 67 percent since 2004, according to industry estimates. In Canada, where Target and others have adopted smart cards, losses from card skimming were reduced by 72 percent from 2008 to 2012, according to industry estimates.
A reason the United States has been slow to embrace change is that all players in the payments system – merchants, issuers, banks and the networks – have not been able to find common ground on how to share the costs of implementation.
About 10 years ago, Target piloted an early generation of the chip-enabled technology on the Target VISA REDcard, with mixed results. Notably, the cards were much more expensive to produce and required the replacement of store card-readers. Also, the technology at that time would have only been usable in our stores, making for a confusing experience for customers, overall. After three years of going it alone, we discontinued the program.
The reported attacks on Target and Neiman Marcus underline the need to do more. If we truly want to prevent this from happening again, the business community must move together. No one company or industry can solve this challenge on its own. Strengthening consumer protection requires a coordinated response. This is a shared responsibility.
At Target, we know we have work to do. For years, we made significant investments in security. We had multiple layers of protection in place. But we still came under attack by sophisticated, global criminals. We will do everything we can to further strengthen Target’s systems. We will meet our accelerated goal for getting chip-enabled technology in place in our own stores. We will invest in protections for mobile transactions and investigate e-commerce solutions. And we hope the rest of the business community will join us in that effort.
Mulligan is chief financial officer and executive vice president for Target.
Central Garden & Pet makes progress in first quarter
Central Garden & Pet is already starting to see results in the first quarter ended Dec. 28 from an operational strategy it put in place following a disappointing fourth quarter that yielded “unacceptable” financial results.
The leading marketer and producer of branded products for the lawn and garden and pet supplies markets reported net sales of $291 million, a 1% decrease from $292.5 million in the first quarter of the prior year. However, the company’s first quarter operating loss improved to $8.4 million compared to an operating loss of $13.1 million in the first quarter of 2013.
The company also narrowed its net loss for the quarter to $12.7 million, or $0.26 per fully diluted share, compared to a net loss of $15.3 million, or $0.32 per fully diluted share in the year-ago period.
Central Garden & Pet historically has reported a loss in its fiscal first quarter given the seasonal nature of the lawn and garden category.
“Our first quarter showed some improvement. I am pleased we are starting to see improved performance from the changes we are making,” said president and CEO John Ranelli. “Although we are encouraged by our progress, there is still much work to be done to get the business consistently operating as it should. I am optimistic about the company’s future and our ability to deliver improved returns to our shareholders and the highest level of service and innovative products to our customers.”
Net sales for the garden segment increased $8.6 million, or 9%, from the same period a year ago to $105.9 million, due primarily to higher seasonal décor, wild bird feed and professional fertilizer revenues. The garden segment’s branded product sales for the quarter were $92.8 million and sales of other manufacturers’ products were $13.1 million. Historically, first quarter revenues for the garden segment have been the lowest of any quarter of the year due to the seasonality of the lawn and garden market. In the first quarter, the garden segment’s operating margin improved 290 basis points. The garden segment’s operating loss in the quarter was $6.2 million, compared to an operating loss of $8.5 million in the first quarter of 2013.
First quarter net sales for the pet segment declined $10.6 million, or 5%, from the same period a year ago to $184.6 million, due in part to lower sales of aquatics products. The pet segment’s branded product sales were $140.5 million and sales of other manufacturers’ products were $44.1 million. The pet segment’s operating margin increased 260 basis points, due in part to improved results in its dog and cat businesses. The pet segment’s operating income was $14.4 million compared to $10.2 million in the prior-year period.
E-retailer Newegg launches customer-benefit program
Leading electronics-focused e-retailer Newegg is looking to grow its customer base while keeping existing customers happy with a new customer-benefit program, which offers, in part, complimentary expedited shipping for $49.99 per year.
"We always seek ways to improve the customer experience and implementing a benefit program is the latest example of how we’re making it easier and more rewarding to shop at Newegg.com," said Soren Mills, chief marketing officer of Newegg North America. "Free expedited shipping is in itself a great benefit, but beyond that we’re including many other perks to enhance the shopping experience."
Called Newegg Premier, the program’s membership benefits include:
- Free expedited shipping 3 days or less
- Discounted rates on 2-day and next-day shipping
- Special alerts to give members early notice of upcoming sales
- Member-only shopping experience with custom backgrounds and information panel
- Free returns with complimentary shipping and no restocking fees
- Exclusive deals for Newegg Premier members
- Dedicated customer service telephone number
Newegg’s customer base has grown to more than 25 million registered users. Newegg is marketing the new customer-benefit program as one that offers “substantial” value not only to frequent customers, but also to any customer who desires a personalized, streamlined shopping experience.
Customers who sign up by Feb. 18 receive a free 30-day trial.