) woes seem far from over. As per media reports, Standard
& Poor's Ratings Services has dealt a blow to the company by
cutting its debt rating to "A" from "A+" after a massive security
breach and not-so-profitable Canadian operations that marred its
fourth quarterly performance. However, the stock price did not
witness much movement as it fell a meager 0.4% on the index.
Target, one of the largest discount retailers, faced a massive
security violation during the holiday season, from a day before
Thanksgiving up to Dec 15. The company publicly recognized the
breach, which affected 70 million of Target's customers, four
days later on Dec 19, 2013.
The security breach reduced footfall considerably and
subsequently dented the sales and profitability. Target's
fourth-quarter fiscal 2013 adjusted earnings (U.S. operations
only) of $1.30 per share dropped 21.2% from $1.65 in the year-ago
quarter. Total revenue dropped 5.3% to $21,516 million from the
Apart from the breach, Target's much anticipated Canadian
expansion met with disappointing results as it reported an
operating loss of $941 million in its first year. Target, which
Family Dollar Stores Inc.
Dollar Tree, Inc.
Big Lots Inc.
), had first entered in Canada in 2013.
Further, the rating agency believes that the breach is likely to
keep traffic at bay for some more time and may result in
potential costs (litigation, compensation, etc.) during the first
half of fiscal 2014, thereby putting Target's revenues under
However, S&P believes Target's steady cash flow generation
will help manage the expenses without much difficulty and the
Canadian division's performance will also improve in fiscal 2014.
The agency has also reiterated its long-term outlook on the
retailer at "Stable."
Currently Target carries a Zacks Rank #3 (Hold).
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