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Data breach takes toll on Target profit

9:48 AM, Feb 26, 2014   |    comments
A customer signs a credit card statement next to a scanner in a Target store on Dec. 19, 2013, in Miami, Fla. (Photo: Joe Raedle, Getty Images)
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(USA TODAY) -- Tough as the holiday season was for many retailers, Wednesday's fourth quarter earnings report prove that few had it tougher than Target, which was bedeviled during the peak shopping season by one of the largest-ever retail data breaches

The company's long-awaited fourth quarter results tell a tale of woe: Net income fell 46% to $520 million, or 81 cents a share, from $961 million, or $1.47, a year earlier, the Minneapolis-based company reported.

At the same time, the discount retailer said that sales fell 5.3%, it reports, as many customers were leery about shopping at the discount retailer after the breach.

Even then, there was some relief among investors that the news wasn't even worse, and Target shares rose slightly in pre-market trading .4% or about 24-cents.

Target says it earned $520 million, or 81 cents per share, for the three months that ended Feb. 1. That compares with a profit of $961 million, or $1.47 per share, a year earlier. Revenue fell to $21.5 billion from $22.7 billion. Revenue at stores open at least a year fell 2.5%.

Eyes of the nation's retailers remain fixated on Target, with a clear recognition that the potential for massive data breaches are hardly in the rear view mirror. Shortly after the breach, Target tried to quickly lure back holiday shoppers with a weekend of 10% discounts in December. It then offered all affected customers a year of free credit monitoring. Target executives were even called in to testify before Congress on the data breach earlier this year.

It isn't clear when Target will fully recover from the breach, but Avivah Litan, a security analyst at Gartner Inc., a technology firm, puts the costs of the breach from the $400 million to $450 million. That would include the bills associated with fines from credit card companies and services for its customers like free credit card report monitoring.

On Wednesday, Chief Executive Officer Gregg Steinhafel said, in a statement, that the company's efforts to lure back shoppers are starting to pay off. But it hasn't been easy.

"Results softened meaningfully following our December announcement of a data breach," he said, in a statement. "We will continue to work tirelessly to win back the confidence of our guests and deliver irresistible merchandise and offers, and we are encouraged that sales trends have improved in recent weeks."

The Associated Press contributed to this report.

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