Target Profits Fall 16 Percent in 1st Quarter

Nation’s third-largest retail store saw heavy expenses in security because of credit card data breach.
4:26 | 05/21/14

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Transcript for Target Profits Fall 16 Percent in 1st Quarter
Okay. And we've made it to Wednesday may 21 the financial markets in New York are open and today's big number 16%. That's how far profits fell in the first quarter for target the nation's third largest retail store chain hello everyone I'm Michelle Franzen in New York. Here explain how and why target missed its mark. My accidentally of Yahoo! finance -- 16% is quite a tumble when it comes to earnings and a big number what's behind this huge drop. Obviously -- had a rough road here -- actually did come in with something better than expected revenues but as you mentioned that profit line. I was a -- very big -- decline it seems to be related to heavy expenses related to that data breach with credit card. Customers that we -- we all know about from several months ago. It continues to weigh in their results there's been very heavily on extra security and also potentially -- -- claims. As well they're also losing out quite a bit of money in Canada have a very aggressive expansion into Canada tried to sort of all it -- become a very big retail presence up there. And is really not work very well as sales continue to fall short they spent a lot of money to build the bricks and mortar presence up there and that seems like it's gonna be a burden for a little while. So let's talk about that revenue a little bit of quiet why the rise in the revenue and the -- dropping. Yeah I mean the revenue was it was basically a lot of promotional activity obviously trying to draw people into the stores the traffic was not great. But the sort of average amount that each customer -- was off. Vs expectations and that's you know obviously consider to be a good thing but it seems like it was driven a lot by discounting so that's that's a decent performance I will say. For any retailer the first quarter of the year is not a make or break one obviously comes. After the holidays. An obvious in the spring selling season is someone important. But not so much for for every day staples types -- -- -- got targeted. Now following that huge data breach CEO Greg Stein -- was ousted what mortars target need to do is it. To get back on target. Well obviously job one is to find a new leader and find somebody. -- can come in there and figure out exactly how to you know address the operational challenges and I don't know that we have a clear idea of exactly what target might be looking for the boards obviously. -- consider a lot of candidates inside and out. I think the questions going to be whether target wants to go for somebody who is -- considered to be kind of a retail specialist somebody kind of knows the merchandising side -- things or somebody who just -- And -- get their arms around a very large enterprise like target. And try to get it operating more efficiently obviously. Figure out what needs to be figured out on the technology side and all that -- to me it's kind of a wait and see. Story for target until we know exactly who's going to be running the company what is interesting is the at least immediate reaction on Wall Street. Was somewhat positive -- -- stock went up a little bit in premarket simply -- apparently because. That job that same store sales number was better than expected and expectations were very law. And you know we're witnessed scenes maybe the inevitable slow and into the brick and mortar businesses but you also mentioned an aggressive expansion program how does that fly in the face of Amazon -- e-commerce. While target its expansion program was all about Canada so essentially that they're pretty much -- out in the US most likely -- -- -- physical presence they did see an opportunity of course to Minneapolis based company they felt like they could know the Canadian markets. Reasonably well it's just a geographic expansion so in general wasn't so much of that on physical verses on line. As it was sort of an opportunity to go to an adjacent market makes -- head but I do think you -- in in terms of we are seeing especially in the last I say two to three quarters. Some evidence that that -- line. The -- of the online retail gravity is really starting to affect. Traditional reach now we saw staples. Struggling -- just this week. And I do think that essentially it's going to be a slow bleed -- best when it comes to to sort of physical store presence and if you're you're a big retailer. That does not have a very compelling online offerings it's going to be worse. Mike said toll from Yahoo! finance thanks for joining us all right thank you. You of course can keep up with the latest headlines right here on Even watching the big number I'm Michelle Franzen -- New York.

This transcript has been automatically generated and may not be 100% accurate.

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