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Security Breach at Target Hits 70M

Zacks Equity Research

Specialty retailer Target Corp. (NYSE:TGT) recently provided updates on its ongoing investigation pertaining to the security breach in the holiday season and the fourth-quarter fiscal 2013 guidance.  

Target faced its worst security breach when information related to credit and debit card data of approximately 70 million customers were hacked. The theft occurred during the holiday season, from a day before Thanksgiving up to Dec 15. The company publicly recognized the breach four days later on Dec 19, 2013.

As a part of the ongoing inquiry, Target has disclosed that the data theft included names, mailing and email addresses and phone numbers. Moreover, the company has extended help to aggrieved customers by offering one year of complimentary credit monitoring and identity theft safeguard. Target’s customers have three months to register for the program.

The company also trimmed its fourth-quarter 2013 guidance owing to the massive security breach. It now expects adjusted earnings per share for its U.S. segment in the range of $1.20 to $1.30, compared with the previous projection of $1.50 to $1.60. Further, comparable store sales are expected to decline 2.5% in the fourth quarter as against flat comps forecasted earlier.

The U.S remains vulnerable to card frauds as the card payment system is flawed. Unlike Europe and Canada, credit cards in the U.S. use a magnetic strip to store data, making it effortless to obtain data with the sophisticated hacking technology in modern times. Outside the U.S., cards have digital chips to contain data, which generate a new code after every use and thereby make hacking difficult.

The biggest security breach in U.S history was detected in 2007 when the leading off-price retailer of apparel and home fashions, The TJX Companies, Inc. (NYSE:TJX) reported data theft involving nearly 90 million credit and debit cards over a span of about one and a half years. Ever since, companies like Wal-Mart Stores Inc. (NYSE:WMT), Macy’s Inc. (NYSE:M) as well as Target has been deploying substantial cash to tighten security.

Further, this Zacks Rank #3 (Hold) stock declared closure of 8 domestic outlets by May 3, 2014.

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