Target Traffic Slows After Devastating Data Breach

Source: Kevin Dooley / Flickr

Kantar Retail’s latest findings revealed news for Target (NYSE:TGT) this week that didn’t surprise consumers, investors, or even the company’s executives: Target traffic has dropped significantly since its large-scale data breach in December. USA Today reported on Kantar’s findings on Tuesday, saying that according to the consulting group, Target’s customer traffic in January, online and in stores, fell to its lowest point in three years. Thirty-three percent of U.S. households shopped at Target in January, while 43 percent visited the store in January 2013.

Those numbers showed significance losses for the now-struggling Minneapolis-based retailer, and Kantar said that the group of shoppers most to blame for the declines include Gen Xers, along with “fringe” shoppers who don’t shop very often, but when they do, it’s at Target. Kantar’s data showed that visits by lower-income customers who shop less frequently declined 30 percent, while Gen-X shoppers — ages 32 to 49 — declined to 38 percent from 53 percent last year.

Target’s holiday season data breach that resulted in the theft of about 40 million credit and debit card accounts, as well as 70 million other records with customer information, therefore affected the way consumers shopped at the beginning of 2014, and it is still playing a part in their shopping decisions three months after the fact. Though Target has vowed to restructure its security system in order to ensure no breach occurs again, many customers are still leery about shopping at the discount retailer, and some are more likely to visit Target’s many rivals, including Wal-Mart Stores (NYSE:WMT) and (NASDAQ:AMZN).

That is a big problem for Target’s business: It is already suffering slowing demand on account of more competition for brick-and-mortar retailers, and a greater turn toward online shopping is really not something it can afford. That’s why Target President and CEO Gregg Steinhafel has made statements to try to offset that movement, promising the retailer “will continue to work tirelessly to win back the confidence of our guests.”

The retailer released its fourth-quarter earnings last month, and as expected, said that store sales suffered in the weeks following the disclosure of the breach. Net income fell 46 percent to $520 million from $961 million in 2012, while sales were down 5.3 percent. Target shares have also fallen dramatically, but they were sitting up 0.39 percent at $61.18 as of 10 a.m. Eastern on Wednesday.

Target had a rough end to 2013 and a rough start to 2014, but the good news for the retailer is that time (somewhat) heals all wounds, and analysts expect Target’s business to eventually rebound. They don’t believe shoppers will continue boycotting the company in the long run once the dust settles. According to Brian Yarbrough, a research analyst with Edward Jones who spoke to USA Today, the data breach likely won’t significantly affect the retailer’s customer base in the long run.

He said to the publication: “Probably 5 percent to 10 percent of customers will never shop there again. It’s just the nature of the beast. But in this day and age, customers have slowly become immune to the breach.”