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THURSDAY, FEBRUARY 27, 2014
THE UNIVERSITY DAILY KANSAN
Target faces bigger challenges than TJX
ASSOCIATED PRESS
NEW YORK — History doesn't always repeat itself.
The hit to TJX Cos. was minimal after it disclosed in 2007 a massive data breach of customer information at its T.J. Maxx, Marshalls and HomeGoode stores.
But Target Corp. isn't faring as well. More than two months after it revealed that hackers stole credit card numbers and personal data of millions of its customers. Target's sales, profit and stock prices have dropped.
What's worse, the nation's second largest discounter faces the prospect that some shaken shoppers may not return to its stores for a long time. In fact, Target on Wednesday said it expects business to be muted for some time, though it said sales are recovering since the breach was disclosed in mid- December.
Although the data breaches at the two retailers each
TJX found itself in the same situation years ago when it announced what was the largest security breach by a retailer at the time. Still, the fortunes of TJX Cos. and Target may wind up being quite different.
JTX declined to comment for this story, but John Mulligan, Target's chief financial officer, told The Associated Press on Wednesday that the most loyal customers have stuck with Target, but wooing back others will take time.
"We need to remind people why they fell in love with Target," he said.
In this Dec. 19, 2013, file photo, a passer-by walks near an entrance to a Target retail store in Watertown, Mass. Target Corp. reports quarterly financial results before the market opens on Wednesday.
affected millions of shoppers, analysts say a combination of factors makes Target's challenge bigger. Those include the timing of each company's disclosure and Americans' heightened sensitivity toward privacy concerns now versus before the TJX breach.
STEVEN SENNE/ASSOCIATED PRESS
The retailers' fates are playing out differently so far. TJX's stock slid 12 percent in the weeks after the breach disclosure to as low as $13. But by the end of 2007, the shares rebounded and today, they're trading at about $58.
"We need to remind people why they fell in love with Target."
JOHN MULLIGAN Target chief financial officer
Sales also weren't derailed in the breach's aftermath: Revenue at stores opened at least a year, an important retail measurement, were up a better-than-expected 4 percent for the year following the breach.
Meanwhile, Target said on Wednesday that its profit in the fourth quarter fell 46 percent on a revenue decline of 5.3 percent as the breach scared off customers worried about the security of their private data. Revenue at stores open at least a year fell 2.5 percent.
Target's stock had fallen 11 percent since it disclosed the breach in mid-December.
But on Wednesday, investors pushed shares up nearly 7 percent on the news of recovering sales. The stock is now trading at about $60, down 5 percent since the theft was disclosed.
TMI: TOO MUCH INFORMATION?
Analysts say one reason Target is suffering more than TJX did may have something to do with the timing of their disclosures.
Target disclosed on Dec. 19 data breach compromised 40 million credit and debit card accounts between Nov. 27 and Dec. 15. Target said it disclosed its breach within days of finding out about it, shortly after the news was leaking online. But the news came at the worst time for a retailer: During the final days before Christmas, the busiest shopping period of the year.
Then, Target revealed the theft was wider than originally believed a month later. On Jan. 10, it said hackers also stole personal information including names, phone numbers as well as email and mailing addresses — from as many as 70 million customers.
Target has said there is some overlap between the two batches of data stolen. When the final tally is in, Target's breach may eclipse the theft at TJX, which is the largest incident for a retailer on record.
Conversely, TJX found out about its breach in mid December 2006, but didn't make it public until the
following month. TJX's theft compromised more than 90 million records over an 18-month period starting in mid-2005.
Initially, in March 2007, the retailer disclosed that 45.6 million credit cards were compromised, but a group of banks suing the retailer put that number at more than 90 million in an October 2007 court filing.
STRUGGLES ELSEWHERE
The fallout from Target's breach also comes as the company is struggling with other problems whereas TJX's business was doing well at the time of its disclosure.
Target was already experiencing sluggish sales in the U.S. as it's faced increased competition from online retailers and other
rivals. Abroad, it's facing disappointing results from its first international expansion into Canada.
On the other hand, the breach at TJX happened as its formula of offering big discounts on major fashion and home brands was resonating even more as the country was heading into a recession.
Target said it can't yet estimate how much the data breach will cost it in total. But Avivah Litan, a security analyst at technology research firm Gartner Inc., a technology research firm, puts the costs of the Target breach at between $400 million and $450 million, including bills associated with fines from credit card companies and services for its customers like free credit
COSTS, COSTS, COSTS
report monitoring.
But TJX's costs, which Litan estimated at about $275 million, pale in comparison. That included costs associated with lawsuit settlements and fixing its security systems.
Litan said Target faces more costs because there was more damage from the breach. In the case of TJX, about three-quarters of the cards compromised had either expired by the time of the theft or had masked data in the magnetic strip, meaning the information was stored as asterisks rather than numbers.
"It took the criminals much longer to get them to the black market and then turned into counterfeit cards," Litan said of the TJX breach. "This time, the criminals moved with lightning speed to cash out."
Ex-lawmaker makes plea for Alzheimer's research
MCCLATCHY TRIBUNE
WASHINGTON — Four years ago, Dennis Moore retired from the House of Representatives, discouraged by relentless partisan bickering.
The former Kansas congressman returned to Capitol Hill on Wednesday to urge his old colleagues on both sides of the aisle to invest in finding a cure for Alzheimer's, a degenerative brain disease from which he suffers.
Moore, 68, told a Senate health appropriations subcommittee about the loss of his father to Alzheimer's, and
his own diagnosis in 2011.
"I had become concerned when I noticed I was having some difficulty remembering random events and difficulty managing our household finances." Moore said. "Since then, I have learned coping skills but still recognize the issue I have with my short-term memory loss."
Increased funding for Alzheimer's research, education and support should be a bipartisan goal, Moore said.
"I really think we need to find those areas where we can and should find agreement,"
he said. "Good people on both sides work together, and there truly are good people on both sides. This is a disease that is affecting many people around the world. We need to find a way to really manage it more effectively."
In addition to his advocacy for the Alzheimer's Association, Moore now fills his time by volunteering to play guitar at senior centers and spending time with family. He still drives, using a GPS device just in case he loss.
"I'm getting a little bored after having this busy, busy career over the years," he confessed.
"Stir-crazy is a good way to put it."
At the hearing, Moore read from a prepared statement and answered questions from his former colleagues.
He spoke in personal terms about the economic costs of Alzheimer's,the most common cause of dementia in older adults. The disease is fatal.
"Not only does Alzheimer's steal our memories, independence and eventually our ability to function, it demands increasing amounts of care," Moore told the panel of senators. "Beyond the exhaustion and stress,
there is the financial burden. Alzheimers is creating an enormous strain on the health care system, families and the federal budget."
Sen. Jerry Moran, R-Kan., asked Moore what he does on a daily basis to keep symptoms at bay.
Moore said he takes medication and exercises daily. "My wife encourages me to do that and I'm a good husband. I say, 'Yes dear,'" he said to laughter.
"The way that you're living, your life gives others courage and hope," Moran said.
Moran, the ranking member
of the subcommittee, called Moore a friend and applauded his desire to take his own difficult challenge and use it to help others.
He and other senators at the hearing likened finding a cure for Alzheimer's to investing in the goal of landing on the moon.
For every $27 Medicaid and Medicare spends, the federal government only spends $1 on Alzheimer's research, Moran said. Without a way to prevent or cure Alzheimer's, Moran said, "it will be all but impossible to rein in our nation's health care costs."
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