Target is lowering its profit forecast, citing costs related to a huge data breach late last year and what it calls a "challenging" retail environment.

U.S. sales are expected to be "essentially flat," the company said in a statement, while Canadian sales are forecast to be "somewhat softer than expected."

Target's foray into Canada has been a major disappointment for the Minneapolis-based company, with losses last year of almost $1 billion US. Analysts said it expanded too aggressively.

"While the environment in both the U.S. and Canada continues to be challenging, and results aren’t yet where they need to be, we are making progress in our efforts to drive U.S. traffic and sales, improve our Canadian operations and advance Target’s digital transformation," said interim CEO John Mulligan in a statement.

As part of that turnaround strategy, Target last week appointed former PepsiCo executive Brian Cornell as its new CEO. He takes over next week.

Target says it now expects second-quarter adjusted earnings of 78 cents US per share, down from its previous guidance of 85 cents.

The retailer said its second-quarter results will include higher data breach-related expenses of $148 million US, partially offset by $38 million in insurance.

Target announced last December that hackers had stolen millions of credit card and debit card customer records. It initially said 40 million accounts had been accessed. A month later, it upped that figure to 70 million. 

Target shares dropped more than 4.4 per cent to close at $58.02 US in NYSE trading Tuesday.

With files from The Associated Press