The proposed $19 million settlement between Target Corporation TGT and MasterCard Incorporated MA to resolve the data breach issue has fallen apart as per sources. Lack of adequate support from banks has been cited as the main reason.
Last month, both Target and MasterCard reached this settlement based on a condition that at least 90% of the issuers of the qualified MasterCard accounts should accept the offer by May 20, 2015. The amount would reimburse the costs that issuers incurred to re-issue the hacked cards.
However, MasterCard notified that the mandatory number of issuers have not accepted the offer by the deadline and hence, the settlement would not proceed ahead. Target has been informed of the same.
With the deal failing, all the parties will have to begin a new set of negotiations to resolve the data breach issue. Legal representatives of the banks and Credit Unions would be relieved at the news as they argued that the amount so decided as settlement would just cover a miniscule amount of their client’s losses.
In 2013, Target faced its worst security breach when credit and debit card data of approximately 70 million customers were stolen by hackers. The data breach occurred during the holiday season, from the day before Thanksgiving up to Dec 15. The company publicly acknowledged the breach after four days on Dec 19, 2013.
As expected, the incident had shaken consumer confidence resulting in lesser footfall leaving sales and margins dwindling and ensured a public relations nightmare for the company. It also caused the ouster of the then CEO Gregg Steinhafel who stepped down taking sole responsibility for the fiasco.
Ever since, the company has been trying to mend its image. It has adopted extensive customer friendly initiatives, including switching over to chip-and-PIN technology across its REDcard portfolio, expanding omni-channel capacities, enhancing merchandise assortment as well as reducing minimum value for free shipping to $25.
Zacks Rank
Target carries a Zacks Rank #2 (Buy). Other favorably ranked stocks include Citi Trends, Inc. CTRN and Dollar General Corporation DG. Both are Zacks Rank #2 stocks.
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