Bad News for Target Shoppers

With the holiday shopping season under way, it's the busiest time of year for retailers. Unfortunately, Target (NYSE: TGT  ) is one retailer that can't seem to catch a break lately. On Thursday, the discount chain said as many as 40 million Target customers may now be at risk, after credit card data was stolen from its point-of-sale machines in Target stores around the country.

Target said the security breach happened between Nov. 27 and Dec. 15, and could affect any Target shopper who made a purchase in one of the retailer's 1,797 U.S. stores during that time. Target is working with law enforcement, as well as a third-party forensics firm, to investigate the incident.

However, I'm not sure how much peace of mind that brings to the millions of customers whose data was stolen. Especially because the information at risk included "customer name, credit or debit card number, and the card's expiration date and CVV (the three-digit security code)," according to a statement from Target. 

Recovering customer confidence will be tricky
This makes Target the victim of the biggest data breach since 2005, when discounter TJX suffered a security violation that left more than 45 million of its customers at risk for credit card fraud. For Target, the timing couldn't be worse. Black Friday fell on Nov. 29 this year, and Target said both sales and traffic at its stores that day were among the highest the retailer had ever seen. However, all of those shoppers could now be victims of the security breach that occurred between Nov. 27 and Dec. 15.

Target CEO Gregg Steinhafel said the company's first priority is "preserving the trust of our guests and we have moved swiftly to address this issue, so guests can shop with confidence." Given the wide coverage this news has received, I'm not sure consumers will be rushing out to Target to make last-minute purchases before Christmas.

Shoppers may, instead, choose to shop at rival big-box stores, such as Wal-Mart or Best Buy, in the days leading up to Christmas. This could put a dent in Target's profits, particularly because holiday sales can account for as much as 40% of a retailer's total annual revenue. Moreover, the national scope of this security breach could make it even harder for Target to recover the trust of consumers -- and investors. Shares of Target dropped 2% on Thursday to trade around $62 apiece.

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