Massive Target breach could have lasting effects

March 11, 2022

NEW YORK (AP) — Fallout from Target’s pre-Christmas
security breach is likely to affect the company’s sales and profits well
into the new year.
The company disclosed on Friday that the
massive data theft was significantly more extensive and affected
millions more shoppers than the company reported in December. As a
result of the breach, millions of Target customers have become
vulnerable to identity theft, experts say.
The nation’s second
largest discounter said hackers stole personal information — including
names, phone numbers as well as email and mailing addresses — from as
many as 70 million customers as part of a data breach it discovered last
month.
Target announced on Dec. 19 that some 40 million credit
and debit card accounts had been affected by a data breach that happened
between Nov. 27 and Dec. 15 — just as the holiday shopping season was
getting into gear.
As part of that announcement, the company said
customers’ names, credit and debit card numbers, card expiration dates,
debit-card PINs and the embedded code on the magnetic strip on the back
of cards had been stolen.
According to new information gleaned
from its investigation with the Secret Service and the Department of
Justice, Target said Friday that criminals also took non-credit card
related data for some 70 million individuals. This is information Target
obtained from customers who, among other things, used a call center and
offered their phone number or shopped online and provided an email
address.
Some overlap exists between the 70 million individuals
and the 40 million compromised credit and debit accounts, the company
said.
The revelations mean more than 70 million people may have
had their data stolen. And when the company releases a final tally, the
theft could become the largest data breach on record for a retailer,
surpassing an incident uncovered in 2007 that saw more than 90 million
records pilfered from TJX Cos. Inc.
The latest developments come
as Target said that just this week it was starting to see sales recover
from the crisis. The company, however, cut its earnings outlook for the
quarter that covers the crucial holiday season and warned that sales
would be down for the period.
But with the latest news, some analysts believe the breach could be a financial drag on the company for
several more quarters.
"This
is going to linger like a black cloud over the company’s financials for
the first half of the year," said Brian S. Sozzi, CEO & chief
equities strategist at Belus Capital Advisors.
Meanwhile, the
Attorney General from New York announced that it is participating in an
investigation into the security breach. Attorney General Eric T.
Schneiderman called the latest news "deeply troubling."
Molly
Snyder, a Target spokeswoman, told The Associated Press that the company
had no new details to share about how the data breach was executed. The
company has only said that the point-of sale system in its U.S. stores
was compromised.
"I know that it is frustrating for our guests to
learn that this information was taken and we are truly sorry they are
having to endure this," said Gregg Steinhafel, Target chairman,
president and CEO, in a statement.
Target investors have been
largely unmoved by the company’s disclosures. Target’s stock, while
volatile, has traded at about $63 since news of the breach leaked on
Dec. 18. It slipped just 72 cents, or more than 1 percent, to $62.62 in
trading Friday.
But some observers believe the stock could get
battered if consumers stay away from Target stores. Several Wall Street
analysts downgraded their earnings forecasts for the retailer on Friday.
Colleen
McCarthy, 26, of Cleveland, Ohio, is among those who are avoiding
Target. McCarthy used her Chase debit card at a local Target on the
Friday after Thanksgiving and received a notice from
Chase a few days
after news of the breach first broke. The letter identified her as a
potential victim of the Target breach but said, "don’t worry." At the
time, she was only somewhat concerned.
But Monday night McCarthy
received a call from Chase, alerting her that someone tried to use her
debit account twice in Michigan. The thief cleared $150, which caused
her rent check to bounce. Chase restored the money to her account.
"This has been a nightmare," she said. "My rent check bounced. My
debit card had to be canceled. And who’s to say what other people have
access to my information?"
Target tried to woo scared shoppers
back to stores on the last weekend before Christmas with a 10 percent
discount on nearly everything in its stores. Target is also offering a
year of free credit monitoring and identity theft protection to
customers that shopped at its stores.
Still, some experts believe the company should do more.
"Target
is in a critical situation with consumers because its credibility and
brand loyalty are being questioned," said David E. Johnson, CEO of
Strategic Vision, LLC, which specializes in crisis communications.
"Right now, investors think Target can weather the storm. But the longer
it gets worse, the worse it is for Target."
Johnson says Target
needs to rebuild shoppers’ trust. He believes Target needs to air TV
commercials assuring them that it’s safe to shop in its stores. It also
should offer more incentives like deeper discounts to woo consumers,
Johnson said.
Clearly, Target shoppers were scared off during the
holiday season, when stores can make roughly 20 percent to 40 percent of
their annual revenue.
The Minneapolis company also said that it
now foresees fourth-quarter sales at stores open at least a year will be
down about 2.5 percent. It previously predicted those sales would be
about flat.
This figure is a closely-watched indicator of a retailer’s health.
Target
cautioned that its fourth-quarter financials may include charges
related to the data breach. The chain said the costs tied to the breach
may have a material adverse effect on its quarterly results as well as
future periods.
The company has 1,921 stores, with 1,797 locations in the U.S. and 124 in Canada.
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AP Business Writer Bree Fowler in New York contributed to this report.
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Follow Anne D’Innocenzio at http://www.Twitter.com/adinnocenzio

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