Severe Computer Breach to Cost TJX Cos. at Least $118 Million
The $118 million cost of a severe computer breach dominated headlines Aug. 14 about second quarter 2008 financial results from nationwide clothing retailer TJX Companies Inc. of Framingham, Mass. Aside from that amount -- $107 million of which is being set aside as a reserve the company expects to spend -- TJX posted strong results, with net sales up 9 percent to $4.3 billion. The $118 million assigned to the computer intrusion represents 25 cents per share, TJX said.
"Our operating results mark the strongest second quarter performance in the Company's history and were achieved on top of very strong performance last year," President/CEO Carol Meyrowitz said in the TJX earnings release. "We have continued to learn more about the computer intrusion(s) and are now able to estimate the Company's liability," she added. "Over the past months, we have worked diligently to further strengthen the security of our computer systems. Our customers remain our top priority, and I sincerely thank them for their support during this time."
Computer security experts were startled in June 2007 when TJX disclosed in an SEC filing that as many as 45 million customers' credit and debit card records may have been compromised in the breach, which was initially disclosed in early 2007. The April 14 earnings release said the $107 million reserve "reflects the Company's estimation of probable losses, in accordance with generally accepted accounting principles, based on the information available to the Company as of August 14, 2007, and includes an estimation of total, potential cash liabilities from pending litigation, proceedings, investigations and other claims, as well as legal and other costs and expenses, arising from the intrusion(s)." The statement also said TJX expects to incur future non-cash charges totaling about $21 million that may be recorded in its 2009 financial results.