Target Corp., still reeling from a publicly damaging breach of its customers’ credit card information, just hired a veteran U.S. government advisor to be its chief information officer.
Bob DeRodes will take over the post at Target effective May 5. DeRodes formerly served as an advisor for the U.S. Department of Homeland Security, the Secretary of Defense, and the Justice Department. DeRodes’ first responsibility will be bolstering Target’s cyber-security, as well as designing the company’s future digital agenda.
Target’s chief executive Gregg Steinhafel said, “Establishing a clear path forward for Target following the data breach has been my top priority. I believe Target has a tremendous opportunity to take the lessons learned from this incident and enhance our overall approach to data security and information technology.”
The company has withered under intense scrutiny ever since its computer systems were breached. Hackers broke through Target’s online security system, accessing the personal data–financial and otherwise–of more than 70 million shoppers. The credit and debit card information of more than 40 million people is now considered compromised.
Analysts predict that at least 15 percent of the credit cards could incur fraudulent charges, averaging as much as a few hundred dollars in illicit charges per card. The debacle could ultimately cost Target several billion dollars in total, with an estimated $1.1 billion in repayments to banks for unauthorized transactions.
Target’s performance, even independent of the cyber-debacle, has been unspectacular. Overall earnings before interest expenses and income taxes declined 22.4%, from $1.82 million to $1.43 million. Sales dipped 6.6% from $20.9 billion to $22.4 billion, a 2.5% decrease in comp-store sales. Even more ominous, net profits skid 46 percent to $520 million, down from $962 million.
Target continues to struggle with its gross margins, which contracted for the sixth successive quarter. For the fourth quarter, gross margins narrowed 0.3% to 28.4%. Analysts largely predicted 28.8%.
Also in the fourth fiscal quarter, Target’s net income declined 5.2% to $981 million, down from $1.04 billion last year. Profit totaled $1.49 per share; analysts were generally forecasting $1.39. Target’s stock rose 2.9% on the strength of the news; last year its shares dropped 15 percent. Overall earnings before interest expenses and income taxes declined 22.4%, from $1.82 million to $1.43 million. Sales dipped 6.6% from $20.9 billion to $22.4 billion, a 2.5% decrease in comp-store sales. Even more ominous, net profits skid 46 percent to $520 million, down from $962 million.
For the full year 2013, Target’s sales declined 0.9% to $71.3 billion, down from $72 billion last year. For the same period, net profits dropped a substantial 34.3%.
Target’s fourth-quarter report also doesn’t fully reveal the extent of its missteps regarding its attempt to expand further into Canada. Target originally had grand ambitions about the potential for the move but ultimately lost more than $800 million so far making the attempt.