Hadley Malcolm

USA TODAY

Target's first-quarter profit fell 16%, missing Wall Street estimates, as the retailer reeled from losses in its Canadian operation and costs of last year's data breach, the company announced Wednesday.

Target reduced its guidance for the year and said it could not estimate future expenses related to the data breach.

Target's adjusted earnings, excluding costs related to the breach and other one-time items, were 70 cents a share, 1 cent below analysts' consensus estimate in a survey by FactSet.

Target's net earnings of $418 million, or 66 cents a share, compared with $498 million, or 77 cents a share, in the same period last year.

The company generated sales of about $17 billion, a 2.1% increase over last year. Target also announced that the massive data breach it sustained over the holiday season last year cost the company a net $18 million in the first quarter – $26 million in expenses offset by an $8 million insurance claim.

For all of 2014, Target cut its estimated earnings per share to between $3.60 and $3.90 compared to prior guidance of $3.85 to $4.15.

Interim CEO John Mulligan said the first quarter performance was "in line with expectations," in a company statement.

"While we are pleased with this momentum, we need to move more quickly," he said. "As a result, we have made changes to our management team and are investing additional resources to drive U.S. traffic and sales, improve our Canadian operations and advance our ongoing digital transformation."

In a conference call, Mulligan said that the company is committed to emphasizing speed of innovation and improvement and providing customers better merchandise assortment.

The announcement comes amid a continued Target leadership shakeup that this week saw the replacement of the head of its Canadian operations as the retailer attempts to salvage its expansion there. Earlier this month CEO Gregg Steinhafel resigned, and in April Target named a new chief information officer to oversee technology and security strategy as it recovers its image after sustaining one of the biggest data breaches in retail history.

Target's Canadian expansion has been struggling since the retail chain opened 124 stores last year. Target plans to open nine more this year. Analysts say the store's prices aren't competitive with the likes of Canadian operations of Walmart and Costco, and that merchandise is consistently out of stock. The Canadian stores did slightly better in the first quarter than in the fourth quarter of 2013, but still lost $211 million, compared to a loss of $205 million in the first quarter last year.

With more stores open than at the start of 2013 though, sales increased to $393 million from $86 million at the Canadian stores.

"As long as they're showing signs of improvement that's key," says Brian Yarbrough, an Edward Jones analyst. He adds though that the Canadian segment is "probably not making progress fast enough," and that Target doesn't "have a good feel or understanding on what the Canadian consumer is about."

In the U.S., sales at stores open at least a year decreased 0.3%, driven primarily by a decrease in the number of transactions the stores had. Target is still attempting to regain customer traffic since the breach deteriorated customers' trust in shopping. Yarbrough says the lowered guidance for 2014 is likely because Target will be more promotional in order to drive traffic to stores, even though it will affect profit margins.

Earnings related to U.S. stores decreased 13.5% to $1.1 billion from about $1.2 billion last year.

Target shares bounced around negative and positive territory throughout the day and ended up 1.04% to $57.20 when the market closed.