Retail chain Target (NYSE:TGT) reported results for the first quarter of its 2014 fiscal year this morning, showing that it is still reeling from last fall's credit card data theft incident. Target's adjusted earnings fell 15% year-over-year to $0.70 per share while sales expanded by 2% to $17.1 billion. The revenue figure was slightly above analyst estimates, and earnings fell just short of the Street view.
The high end of Target's earnings guidance range for the second quarter is lower than the current analyst consensus. The company also lowered its existing full-year earnings guidance by 6%. The new target range stretches from $3.60 to $3.90 per share; current Street projections were set at $3.98 per share.
These forecasts include estimates of data breach costs, but the company concedes that the final tally may be different. Expenses include reissued REDcards, investigation of fraud claims, securing Target systems against future hacking attempts, and various legal costs. "These costs may have a material adverse effect on Target's results of operations in second quarter and full-year 2014 and future periods," the company stated.
For the first quarter, Target said it incurred $18 million of net expense due to the data breach, reflecting $26 million of total expenses partially offset by an $8 million insurance receivable. Target reported in February that the data theft had cost the company $17 million in the fourth quarter -- $61 million of total expenses offset by the recognition of a $44 million insurance receivable.
In the most recent quarter, in the domestic segment, sales were flat year-over-year while gross profits shrank by 3.9%. In the younger and smaller Canadian division, sales more than quadrupled and gross profits doubled year-over-year. Canada now accounts for 2.3% of Target's total sales, up from 0.5% in the year-ago period.
"While we are pleased with this momentum, we need to move more quickly," said interim CEO John Mulligan in a prepared statement. "As a result, we have made changes to our management team and are investing additional resources to drive U.S. traffic and sales, improve our Canadian operations and advance our ongoing digital transformation."
Today's report comes a day after the retailer fired the president of its troubled Canadian operation and two weeks after the abrupt departure of Target CEO Gregg Steinhafel.
-- Material from The Associated Press was used in this report.