Target Is Still Reeling From Data Breach

A blog about business and economics.
May 21 2014 11:37 AM

Earnings Show Target Still Reeling From Data Breach

John Mulligan, now the interim CEO of Target, testifies before the Senate Judiciary Committee on Feb. 4, 2014, in Washington, D.C.
John Mulligan, now the interim CEO of Target, testifies before the Senate Judiciary Committee on Feb. 4, 2014, in Washington, D.C.

Photo by Win McNamee/Getty Images

Target reported first-quarter earnings below expectations and cut its guidance for the year on Wednesday, the latest sign that the retailer is still reeling from the massive data breach it suffered last fall. Profits fell 16 percent and traffic to Target's stores declined for the sixth straight quarter. Investors were ambivalent toward the news, with the company's shares trading sideways in the morning.

Since the start of the month, Target has made a series of changes to its top management with the hopes of turning its teetering stores around. The board fired Gregg Steinhafel, a 35-year veteran of the company, from his post as CEO in early May and announced on Tuesday that the head of operations in Canada was out. On top of the harm wrought by the data breach, Target lost nearly $1 billion in Canada last year after a hasty and disastrous rollout of 127 stores.

Gawker shone more light on the botched Canada expansion Wednesday afternoon when it published an email from a former management-level employee at Target Canada explaining what he/she thought went wrong. The organizational and operational blunders detailed in the email are glaring, from Target refusing to tailor its U.S. strategy to fit the Canadian culture, to preventing employees from filling empty shelves with other merchandise when the items for a specific space were out of stock. Traffic-driving staples like milk and eggs were constantly sold out and stores had no way of knowing what merchandise was available—or would be sent to them—from Target's Canadian distribution centers.*

Advertisement

Perhaps most troubling in the latest earnings report was Target's admission that it cannot estimate how much cleaning up the data crisis will ultimately end up costing. Future expenses could include payments to claims for counterfeit fraud losses, litigation, and various consulting fees. "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 wrote in its earnings release.

For now, Target has placed its future in the hands of John Mulligan, the former chief financial officer who took over for Steinhafel as interim CEO. Mulligan at his appointment swore to make progress and help the company recover from its missteps while at the helm, but also said that he was not interested in taking over the chief executive role permanently.

*Update, May 21, 1:00 p.m.: This post has been updated to incorporate new information from an email obtained and published by Gawker on Target's Canadian operations.

Alison Griswold is a Slate staff writer covering business and economics.

 

TODAY IN SLATE

Sports Nut

Grandmaster Clash

One of the most amazing feats in chess history just happened, and no one noticed.

The Extraordinary Amicus Brief That Attempts to Explain the Wu-Tang Clan to the Supreme Court Justices

Amazon Is Officially a Gadget Company. Here Are Its Six New Devices.

Do the Celebrities Whose Nude Photos Were Stolen Have a Case Against Apple?

The NFL Explains How It Sees “the Role of the Female”

Future Tense

Amazon Is Now a Gadget Company

Food

How to Order Chinese Food

First, stop thinking of it as “Chinese food.”

Scotland Is Inspiring Secessionists Across America

The Country Where Women Aren’t Allowed to Work Once They’re 36 Weeks’ Pregnant

The XX Factor
Sept. 18 2014 11:40 AM The Country Where Women Aren’t Allowed to Work Once They’re 36 Weeks’ Pregnant
Moneybox
Sept. 17 2014 5:10 PM The Most Awkward Scenario in Which a Man Can Hold a Door for a Woman
  News & Politics
The World
Sept. 18 2014 1:34 PM Americans Fault Obama for Giving Them Exactly the Anti-ISIS Strategy They Want
  Business
Business Insider
Sept. 17 2014 1:36 PM Nate Silver Versus Princeton Professor: Who Has the Right Models?
  Life
Doonan
Sept. 18 2014 2:00 PM On the Death of My Homophobic Dog I named him Liberace, but I couldn’t have chosen a less appropriate namesake for this coarse, emotionally withholding Norwich terrier.
  Double X
The XX Factor
Sept. 18 2014 12:03 PM The NFL Opines on “the Role of the Female”
  Slate Plus
Behind the Scenes
Sept. 18 2014 1:23 PM “It’s Not Everyday That You Can Beat the World Champion” An exclusive interview with chess grandmaster Fabiano Caruana.
  Arts
Brow Beat
Sept. 18 2014 2:03 PM Ryan Adams’ New Song Is a Reminder That He’s One of His Generation’s Best Songwriters
  Technology
Future Tense
Sept. 18 2014 1:24 PM Can the Celebrities Whose Photos Were Stolen Really Sue Apple? It may be harder to prove “harm” than it seems.
  Health & Science
Bad Astronomy
Sept. 18 2014 7:30 AM Red and Green Ghosts Haunt the Stormy Night
  Sports
Sports Nut
Sept. 18 2014 11:42 AM Grandmaster Clash One of the most amazing feats in chess history just happened, and no one noticed.