Target Lowers Guidance, Notes Offsetting Expenses From 2013 Data Breach

Target TGT updated its guidance, now saying it expects second quarter 2014 earnings per share of $0.78, compared with prior guidance of $0.85 to $1.00 per share.

The lowered guidance is due to essentially flat comparable sales with lower-than-expected EBITDA margin driven by promotional markdowns, as customers are spending less and focusing on lower end in the current environment.

The company also said the second quarter results are expected to show expenses of $148 million, offset by a $38 million insurance payment from the December 2013 data breach. These expenses include an increase to the estimated probable losses for what the company believes to be the vast majority of actual and potential breach-related claims, including claims by payment card networks.

Target also paid $1 billion to retire some of its long-term debt, resulting in a pre-tax loss of $285 million, or $0.27 per share, which will be recognized as net interest expense in Target's second-quarter Consolidated Statements of Operations.

Shares of Target were trading down three percent in Tuesday's pre-market.