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Target’s data breach hurting company image

Bloomberg News

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Challenges are piling up for Target Corp. Chief Executive Officer Gregg Steinhafel.

In the last few days, the company said a security breach affected more people and more information than previously thought and the company cut the fourth-quarter forecast for its U.S. operations.

Moreover, the discount chain that captured a broad base of shoppers with its bull terrier mascot, edgy television commercials and “cheap chic” image is barely growing in the U.S. A move into Canada has received a cold shoulder from consumers there. The retailer is late to an industrywide rush to open small, urban stores to capture sales from the millions of people moving to the cities. And with rivals mimicking its playbook, the question is whether the company nicknamed “Tarjay” is losing its cachet.

“They’ve lost the cultural mystique they had five or 10 years ago as being a fashion arbiter,” said Leon Nicholas, an analyst for Kantar Retail in Boston. “Yeah, they still have it with moms, but not so much with the younger generation. They are no longer the go-to source of what’s cool.”

Now, Steinhafel must convince customers that their personal, debit and credit card information is secure. The Minneapolis-based company with 11 Akron-Canton-area outlets said names, home and email addresses for as many as 70 million people were stolen. It previously said credit and debit card data of 40 million accounts was taken. It’s likely the two groups overlap, though it’s unclear to what extent, said spokeswoman Molly Snyder.

“Target has sort of lost a bit of its way in the past year or so,” Nicholas said. “They’ve had traffic declines all this year. There have been multiyear declines and fewer shoppers overall.”

In the third quarter, sales at the website and stores open at least 13 months rose 0.9 percent. Analysts estimated a 1 percent gain. Companywide revenue rose 1.9 percent to $17.3 billion.

Holiday sales were “meaningfully weaker” after the theft was disclosed, the company said. U.S. same-store sales will fall about 2.5 percent in the quarter through January, compared with an earlier projection they would be little changed. Adjusted earnings per share will be $1.20 to $1.30 for the division, down from a previous estimate of at least $1.50.

The turmoil is one of the biggest tests of Steinhafel’s leadership. In earlier positions in the company’s merchandising operations, he played a key role in helping Target differentiate itself from Walmart by appealing to higher-income shoppers.


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