Home improvement retailer Home Depot is still locked into a battle over the security breach it reported in September that put 56 million credit cards at risk. However, the fight is no longer against cyber criminals, but rather consumers affected by the breach and government agencies. To date, the retailer is involved in "at least 44 civil lawsuits" in the US and Canada.

The number of legal actions that Home Depot is facing was uncovered in a November regulatory filing to the US Securities and Exchange Commission. While the 44 civil suits from affected customers aren't unexpected, Home Depot says that more claims could be coming, including those on "behalf of customers, payment card brands, payment card issuing banks, shareholders or others seeking damages or other related relief, allegedly arising from the data breach." Home Depot believes that payment card issuers will make claims, the result of which could have an effect on its financial position.

Civil actions aren't the only issues that the company is dealing with, as government agencies are also conducting investigations. Home Depot believes that agencies could seek injunctive relief, something that would increase costs for security, have a negative impact on system operations and information collection, and put the company "at a competitive disadvantage with other retailers."

"We are also facing investigations by a number of state and federal agencies. These claims and investigations may adversely affect how we operate our business, divert the attention of management from the operation of the business and result in additional costs and fines," reads the filing.

For investors there is some silver lining, as the company took out a $100 million insurance policy for network security and privacy liability before the intrusion occurred. Under the insurance policy the Home Depot has a $7.5 million deductible, but at this time it only believes $15 million will be reimbursable. So far, the Home Depot has spent $43 million in relation to the breach. However, the company indicates that the full cost of the incident is still unknown.

Even with $43 million spent on the breach, the Home Depot was able to achieve growth in its third quarter results. For the period ending November 2, the company saw a 5.2 percent sales growth year-over-year. Customer transactions were up by 11.1 million compared to 2013, with a total of 355.4 million.

The filing does give some additional clues to the how intrusion occurred. According to Home Depot, the intruder used the user name and password of a vendor to "enter the perimeter of the company's network." Afterward, the intruder was able to gain elevated system rights to access other network areas in order to "deploy unique, custom-built malware" in the Home Depot's self-checkout systems.

By Electronista Staff

Here is the original post:
Home Depot faces 44 civil lawsuits from breach, spent $43M on fallout

Home Retail Group(HOME)had a torrid time after the recession. With Argos struggling for several years, it was relying on Homebase to keep growing. However, the tide has turned and Argos has become one of the most promising brands on the high-street, while Homebase is suffering in a challenging market.

To ensure some security, Home Retail is revamping Homebase. It admits in its recent half-year results that the DIY chain suffers from "inconsistent store operating standards and a large estate with low sales densities that result in a challenged financial model."

That's why there will be a significant reduction and streamlining of the business - 30 stores are expected to close in the next financial year, with the aim of reducing its estate size by 25% by the end of FY2018 (roughly 80 store closures).

This is anticipated to result in a smaller, more secure company.

However, analysts at Citi Research believe that this could result in significant costs to an already struggling business, noting that there are "only 65 Homebase stores coming up for lease expiry or renewal over the next three years." This could result in "a high degree of paid lease exits."

UBS is of a similar mind-set, stating that "gross margins could remain down given clearance costs from closures."

The rapid growth of online retailing in the home improvement sector seems to be the driving force behind the store closures. With consumers now more inclined towards a simpler shopping process - the click and collect method - it is becoming unnecessary to maintain warehouse sized stores. This already seems to be influencing sales at Homebase, with the first-half report highlighting a 46% increase in mobile device visits, partially helped by increase in use of the "reserve and collect" scheme. This resulted in a 12% "multi-channel" sales increase, now accounting for 7% of Homebase total sales.

But it is not just Homebase that is suffering from shifting consumer preferences. Kingfisher's(KGF) B&Q also has to reduce its estate portfolio, although it plans to reduce store size rather than quantity through its "Right size Right place" scheme. Parallel to this plan will be an increased emphasis on "Click, Pay and Collect", similar to Homebase's new strategy.

Travis Perkins'(TPK) Wickes brand is also downgrading its estate, as it too looks to embrace the online revolution.

It seems to be Kingfisher's Screwfix is the only DIY home improvement retailer to excel at the moment, announcing 23% growth in half-year sales. However, due to its appeal to smaller tradesmen, it is difficult to analyse how much of its success is down to the public's shopping preferences.

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DIY industry benefits from self-improvement

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