Target Corp.’s stumble into Canada and impact from the customer data breach have led to a cut of its “A+” credit rating.
Standard & Poor’s Ratings Services lowered its corporate credit rating on the Minneapolis-based retailer one step, to “A.”
“The downgrade reflects our expectations for limited recovery of credit metrics given continued operating losses at the Canadian division as well as potential costs related to the data breach,” wrote Standard & Poor’s credit analyst Ana Lai in a report published after the markets closed on Friday.
Lai expects Target Canada’s performance to improve in 2014 but wrote that the data breach could have lingering effects on customer traffic.
The financial aspects for the breach could linger longer, however. “We expect incremental expenses, penalties, and litigations to emerge in fiscal 2014. While the costs related to the data breach are difficult to forecast, we believe these expenses could be significant but manageable given Target’s good cash-flow generation.” Lai wrote.
Target’s short-term obligation rating of “A – 1” remained unchanged, and the outlook is stable.