Target Stock Tumbles on Data Breach Cost

Department store chain lowers its earnings expectations for the second quarter.
5:27 | 08/05/14

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Transcript for Target Stock Tumbles on Data Breach Cost
I'm Michelle Franzen in New York the financial markets are closed in on Wall Street for Tuesday August 5 -- -- story stock. And -- stuck with the story today is target the retailing giant miss seeing the bullseye. And lowering earnings expectations. Investors not to please. To explain exactly what is happening with target I'm joined by Jeff MacKey from Yahoo! finance -- -- -- -- Mark. Well it all started long time ago actually last Christmas -- -- the whole debacle the credit cards and that he'd been an all that business. I believe we docked at the time or at least over the last few months about how target may have been low balling the estimate on how much is gonna cost a mop that -- up. Added today it came home to roost little -- the company warned rather large on the current quarter that they're about to report a couple weeks. Saying that the total -- about a 143 million less -- insurance claims. It's not so -- on Wall Street they're not really taking that very well. Then again that the company did just tires CEO -- of the could be -- new wrinkle in the story there might be sandbagging a little bit but that as far as Wall -- concerned it's a shoot first ask questions later scenario that's a big -- let's take a look at the stock chart adequately you walk us through that. Well that looks like gays chart that is getting pummeled the -- -- come in here and it adds there's not much to say -- solve this and radically gates and are looking for an excuse. They're not again to win -- hire new CEO it's pretty much standard operating procedure in a turnaround situation which is what target -- here. -- -- business really fell apart for a few years there. And ever for at least over Christmas in the last couple years the Canadian expansion -- in the tail. And so a new CEO should command and really just take the numbers and the expectations down as low as possible. So this was to be expected in some ways. But at the same time the sales picture that they painted was -- -- -- sales in the US. Flat Canadian sales disappointing which is incredible because starters lost something like one point six billion dollars. Trying to expand into Canada so far so for it to be actually disappointing relative to prior expectations. It is kind of stunning the stocks down 5% it's relatively cheap. But they're gonna have to prove something -- Wall Street before we get this thing taken off again. The credit card breach happened back in December. Why is it. -- now quarter to. Well you know it's also human nature and all the business Arnold makes sense when -- kind of view it from what people would do when Sally app before was a lot of the -- -- kind of trying to spin and a little bit and maybe -- has now we can -- -- on the -- won't cost -- so much. That is a silly way to go through life and business because eventually -- catches up to you end. They had the reputation damage that's one thing you would see that on the top line in terms of customers. Which is on inspiring but unclear but on the bottom line you also have endless litigation they -- go to -- figure out how much insurance is gonna cost. You have to remedy this situation so they can't happen again all those expenses add up it's far better to make that number huge in the mind of Wall Street. And then come in a little better than what was expected rather than what they did before which was low ball it and then he drag it out now here we are in August. Talking about something that -- in November and ended right around Christmas. And all the while targets also losing -- -- -- two big competitors first. Talk to us about Wal-Mart why -- Wal-Mart beating out target. Yeah well Wal-Mart is not really doing is it's great shakes integrating these you've got raised. I grew up in a target family -- fight against Wal-Mart our whole lives at Eds this is Hatfield and McCoy type -- stop Wal-Mart doesn't really have much of a leg up on target. Anymore and the other way around the Wal-Mart just did their little faster -- -- have a tighter ship right now. These things tend to come and go -- it's like to football team sometimes you know -- the Packers are good sometimes the bears are little better. So I'm not so worried about about that happening in terms what wal mart's doing as I am some of those smaller competitors they -- -- more secular issue for target. And we can't leave about Amazon. Is there anything target can do to sort of jump and on the online shopping as well. You -- I put -- the idea couple days ago and -- still a good idea of -- And predispose to think my ideas are good ideas that target to start doing same -- deliveries ought to -- their stores if you took an average sized target made it into distribution center. You could really LeapFrog Amazon's efforts to try to go to same -- shipping online. It would be a way to get -- yours goods close to the customers get good order online go to a target picking up. But it would require a really coordinated effort from very organized structure discipline management to make this happen. We are not -- -- yet. I wonder. Right countless. LB Scott -- around. I think again I think I think it's a terrific opportunity for him I really do this is a fantastic retailers -- proud history. You know -- it's this is -- company that has been looking for leadership but they no one wants to work for -- that they feel like they're struggling. They're going to be behind Brian Cornell becomes -- -- announces presence with authority. As -- taken some actions just some blocking and tackling they're gonna get this thing turned around I think in the big -- long term. Targets gonna survive and they have a real chance to thrive if he can pull this off. Jeff MacKey from Yahoo! finance thanks as always -- and a you've been watching stories stocks -- For your latest headlines I'm Michelle Franzen New York.

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

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