Data breach costs seen crimping Target's firepower for buybacks

Mon Feb 24, 2014 3:12pm EST
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By Dhanya Skariachan

NEW YORK (Reuters) - Several analysts expect Target Corp (TGT.N: Quote) to slash its share buybacks as the third-largest U.S. retailer copes with costs tied to the massive data breach that affected millions of customers.

Target had originally planned to buy back up to $4 billion of shares this year, but analysts do not expect it to achieve that goal as it sets aside money to deal with the data breach and try not to borrow more so it can maintain its credit rating.

When Target reports quarterly results on Wednesday it will mark the first time that it faces Wall Street since the breach, which led to the theft of about 40 million credit and debit card records and 70 million other records with information such as addresses and phone numbers of shoppers compromised.

The security breach "could crimp their repurchase activity," said Telsey Advisory Group analyst Joe Feldman. "That's definitely a concern of a lot of investors."

Target spokesman Eric Hausman said the company remains committed to share repurchases over time and "will govern the pace of repurchases with the goal of maintaining our strong A credit rating," but did not comment further ahead of its fourth-quarter earnings release.

Any move to curb repurchases could make the retailer's stock less attractive to investors over the near term.

Fitch Ratings analyst Philip Zahn said he did not expect Target to be aggressive with share repurchases as the company would have to take on additional debt to do so and that could end up costing Target its current credit rating.

The retailer already has lowered expectations for the fourth quarter, in part due to weaker-than-expected sales since reports of the cyber-attack emerged in mid-December. News of the breach has hurt its reputation and stock.   Continued...

The sign outside the Target store is seen in Arvada, Colorado January 10, 2014. REUTERS/Rick Wilking