By Chelsey Dulaney And Paul Ziobro 

Nearing the one-year anniversary of Target Corp.'s massive and costly data breach, the company is looking to show that it has moved on.

On Wednesday, the discounter will report third-quarter earnings, and encouraging signs are appearing. Analysts have noted a recent pickup in foot traffic at Target stores and suggested that U.S. sales may have bottomed out. The recent optimism has helped to lift Target shares to 2014 highs.

The positive signals, however, come against a difficult backdrop. Target has already cut its outlook twice this year, as it dealt with the aftereffects of last year's holiday data breach by offering bigger discounts to get shoppers into its stores. Customer traffic at Target's U.S. stores has fallen for seven straight quarters.

By comparison, rival Wal-Mart Stores Inc. last Thursday reported its first gains in same-store sales in the U.S. since 2012, though traffic fell for the eighth consecutive quarter.

Target in August forecast per-share earnings, excluding expenses related to its data breach and other costs, of 40 cents to 50 cents for the third quarter.

The retailer expects sales at stores open more than 13 months to be flat or up 1%.

For the third quarter, which ended in October, analysts are expecting Target to deliver per-share earnings of 48 cents on revenue of $17.56 billion, below the 56 cents a share in earnings and $17.26 billion the retailer posted a year earlier.

In August, the company brought in a new chief executive, Brian Cornell, who is fast coming up to speed with Target's vast challenges, from enticing shoppers to come into stores, to getting them to buy more online, to fixing its operations in Canada, its first international foray, which didn't go smoothly.

"No one is happy with our current performance," he said in August.

Mr. Cornell started his role just a few days into the third quarter, so his imprint has been minimal on the retailer's earnings for the quarter, given the long lead time for merchandising plans and crafting strategy.

But the former PepsiCo Inc. executive's approach is taking shape. In September, he said he wanted Target to focus on just a half-dozen key categories--like baby products, fashion and furniture--that can help it stand out in a sea of sameness in retail. Those areas are poised to get added attention and resources in the months ahead.

For the holidays, Mr. Cornell is trying to imbue Target with that new sense of urgency. He helped set up Target's partnership with Story, a New York boutique that changes over its entire set-up every few months and showcases products from designers and large companies.

After a September visit to Story, Mr. Cornell called on his team to forge a deal to showcase Target's holiday selection there this year. The team, Mr. Cornell said, incorrectly assumed their new CEO meant the 2015 holidays.

Also during these holidays, Target plans to remain aggressive with a rash of promotions aimed at driving sales and traffic--at the expense of profits. Plans include free shipping on all orders from its website, offering deals earlier in the month and opening its stores earlier on Thanksgiving Day.

The aggressive offers are already reflected in a lowered profit-margin outlook Target laid out in August.

Target's results for the fourth quarter should surpass last year's results, which were hit hard by the holiday data breach, which compromised 40 million credit and debit cards.

Target is also still trying to salvage its move into Canada, which faltered from the get-go. Shoppers have complained that Target's prices were too high compared with those in its stores south of the border, and store shelves were often empty of the products consumers wanted.

Target has responded by lowering prices to be more competitive in Canada and adding more new products for the holiday season. Mr. Cornell has made at least three visits to the Canadian operation since he started in August.

MKM Partners analyst Patrick McKeever expects Target to do a "grand reopening" in Canada next year and doesn't put much stock in investor speculation that Target will exit Canada as early as 2015.

But Mr. McKeever is sober about Target's prospects given the scope of the challenges.

"We think the enthusiasm is a bit overdone, as we believe domestic store traffic remains challenged and given our view that Canada may not be fixed or divested for some time," Mr. McKeever wrote.

The Week Ahead looks at coming corporate events.

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