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Aug. 5 — Target Corp. expects its second quarter financial results to include $148 million in gross expenses related to the large payment card breach it reported in late 2013, according to an Aug. 5 company statement.
The gross costs of the breach are, however, expected to be partially offset by $38 million in insurance coverage, the retailer said in the statement providing preliminary information on its financial performance.
In December 2013, Target announced that hackers had accessed data for 40 million of its customers' debit and credit cards.
Target's new statement on the costs of the data breach continues the retailer's attempt to recover customer and investor confidence in its ability to protect personal information of its customers.
John Mulligan, Target's interim president and chief executive officer, and its chief financial officer, said in the statement that Target has been focused on “providing clarity on the Company's estimated financial exposure to breach-related claims.”
Mulligan said that with “the benefit of additional information, we believe that today is an appropriate time to provide greater clarity on this topic.”
In January, Target said it faced a direct financial impact from the breach, but it didn't provide estimates of breach response costs.
In March, Target reported in its Form 10-K annual report to the SEC that it faced $61 million in breach-related expenses in the fourth quarter of 2013.
But in a May 21 Form 8-K filing with the Securities and Exchange Commission about the breach, Target declined to predict what its total specific costs might be to respond to the breach.
Mulligan was named interim CEO in May after the company board accepted Gregg Steinhafel's resignation in the wake of the breach.
Target July 31 announced that its board had chosen PepsiCo Inc. CEO Brian Cornell to take over as the retailer's board chairman and CEO, effective Aug. 12.
The company is scheduled to detail its full expenses and earnings report for the second quarter, as well as its predicted earnings for the remainder of the 2014 fiscal year, in an Aug. 20 earnings conference call, just over a week after Cornell takes over the leadership of Target.
The 2014 fiscal year will end at the end of January 2015.
The expense estimates “include an increase to the accrual for estimated probable losses for what the Company believes to be the vast majority of actual and potential breach-related claims, including claims by payment card networks,” the company said.
“The accrual does not reflect future breach-related legal, consulting or administrative fees, which are expensed as incurred,” it said.
In January, a credit union filed a class complaint against Target, seeking to recoup its costs related to the breach.
In February, banks and credit unions said they had spent $203 million replacing credit cards and debit cards involved in the Target breach.
Over 100 data breach complaints against Target filed by consumers, financial institutions and shareholders have been consolidated in the U.S. District Court for the District of Minnesota.
The Target breach is also the subject of scrutiny by state and federal regulators.
In March, Target said the SEC and the Federal Trade Commission are investigating the company's data security practices.
A group of state attorneys general is also investigating the Target breach.
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