NEW YORK, N.Y. – Target has lowered its second-quarter forecast because of costs related to a massive data breach and the repayment of debt.
The Minneapolis-based retailer also said Tuesday that it expects sales to be flat at established locations in the U.S., as “guests continue to spend cautiously and focus on value” and that promotional discounts are expected to hurt profit margins. Sales are expected to be “somewhat softer” at its stores in Canada as well.
Its shares fell more than 3 per cent to $58.39 premarket trading.
Target Corp. has been reeling since it announced in December that hackers stole millions of customers’ credit- and debit-card records. The theft hurt the chain’s reputation and profits and spawned dozens of legal actions. Target is facing troubles on a number of other fronts as well, including the perceptions that its prices are higher than those at Wal-Mart Stores Inc.
The company’s expansion into Canada, its first foray outside the U.S., has also been a disappointment. Analysts have said that Target botched its Canadian expansion by moving too aggressively.
In hopes of turning a new page, the company last week named PepsiCo executive Brian Cornell as its CEO. Cornell will be the first outsider to serve in the top spot at the company when he starts Aug. 12.
On Tuesday, Target said its second quarter results are expected to include $148 million in gross expenses related to the data breach, which will be offset by $38 million in insurance. It also paid $1 billion to retire $725 million in debt.
The company now expects to earn around 78 cents per share for the quarter, excluding one-time items, down from the 85 cents to $1 per share it previously forecast. Reported earnings per share are expected to be about 41 cent lower than that adjusted figure.