Target first quarter net earnings of $418 million, with adjusted earnings per share down 13.9%. To improve performance, Target has made changes to the management team and are investing additional resources to drive U.S. traffic and sales, improve Canadian operations and advance ongoing digital transformation. The Company is projecting a 2Q/14 adjusted EPS of 85 cents to $1.00. Target now expects Adjusted EPS, reflecting operating results in its U.S. and Canadian Segments, compared with prior guidance of $3.85 to $4.15.
Some of these losses can be attributed to the 4Q/13 data breach of unauthorized access to its network and subsequent stolen payment card information. The Company incurred $18 million of net expense in first quarter 2014, reflecting $26 million of total expenses partially offset by the recognition of an $8 million insurance receivable. This expense does not include any accrual for the potential claims by the payment card networks for counterfeit fraud losses. The Company is unable to reasonably estimate a range of possible losses on the payment card networks’ potential claims.
In response, Target announced the entire REDcard portfolio will be enabled with MasterCard’s chip-and-PIN solution by 2015. Existing co-branded cards will be reissued as MasterCard co-branded chip-and-PIN cards. The Company recorded $13 million of expense in first quarter 2014 related to the decision to convert existing co-branded cards to MasterCard.