The Minneapolis-based company, which operates the second-largest chain of discount department stores after Walmart, said Wednesday that sales fell 5.3 per cent as the breach scared off customers.
Target also offered a profit outlook below Wall Street expectations as the costs of the breach that affected millions of credit and debit card customers linger.
It's also bearing the costs of its move into Canada, which reduced the quarter's net income by 40 cents per share and full-year net income by $1.13 per share.
Target said it earned $520 million, or 81 cents per share, for the three months that ended Feb. 1. That compares with a profit of $961 million, or $1.47 per share a year earlier.
Revenue fell to $21.5 billion from $22.7 billion. Revenue at stores open at least a year, an important retail measurement, fell 2.5 per cent.
Analysts had expected a profit of 80 cents on revenue of 21.5 billion, according to FactSet estimates.
The breach resulted in $17 million of net expenses in the fourth quarter, Target said, with $61 million of total expenses partially offset by the recognition of a $44 million insurance receivable.
Shares of Target rose 99 cents to $57.50 in premarket trading Wednesday as earnings results beat Wall Street estimates by a penny. The stock has fallen about 10 per cent since the company disclosed the breach in mid-December.
"As we plan for the new fiscal year, we will continue to work tirelessly to win back the confidence of our guests. ... We are encouraged that sales trends have improved in recent weeks," Gregg Steinhafel, chairman, president and CEO of Target, said in a statement.
The results underscore the big challenges that Steinhafel faces.
Even before the breach, Target has struggled with uneven sales since the recession as its middle-income shoppers are still not comfortable in spending. And the company has also grappled with the perception that its prices are too high.
Critics also say that the discounter, known for its exclusive limited partnerships with designers, has lost its edge.
But a massive data breach that compromised 40 million credit and debit card accounts between Nov. 27 and Dec. 15 shook confidence among its customers. Target disclosed the breach Dec. 19 and then on Jan. 10 it said that hackers also stole personal information — including names, phone numbers as well as email and mailing addresses — from as many as 70 million customers.
When the final tally is in, Target's breach may eclipse the biggest known data breach at a retailer, one disclosed in 2007 at the parent company of TJMaxx that affected 90 million records.
Last month when Target disclosed the breach was wider than it thought, it forecast that revenue at stores open at least a year would fall. It had originally expected the measure to be flat.
Target is offering free credit monitoring services for a year to those who had their data compromised.
It isn't clear when Target will fully recover from the breach, but Avivah Litan, a security analyst at Gartner Inc., a technology firm, puts the costs of the breach from the $400 million to $450 million. That would include the bills associated with fines from credit card companies and services for its customers like free credit card report monitoring.
Target's results are also being weighed down by its stumbles in its expansion into Canada, its first foray outside the U.S.
Target is trying to fix problems with pricing and shortages in various items. The company started opening Canadian stores last March in waves that added up to about 124 stores, at locations once owned by Canadian retailer Zellers, by the end of last year.
In the fourth quarter, the Canadian segment contributed $623 million of sales, for a total of $1.3 billion for the full financial year. It had a loss of $329 million in the quarter, before interest and tax items, and a loss of $941 million for the full year.
The company said it expects earnings per share for the current quarter range from 60 cents to 75 cents. Analysts had previously expected 88 cents.
For the full year, Target expects earnings per share to range between $3.85 and $4.15. Analysts had expected $4.21.
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