American Express Results Slide on Higher Spending, End of Costco Deal

By Anne Steele

American Express Co. posted lower earnings and revenue in the first quarter of the year as the credit card company continues to ramp up spending in a bid to turn around its business.

But results beat Wall Street expectations, sending shares 2.6% higher after hours to $77.50.

American Express has suffered from issues ranging from the loss of its 16-year exclusive relationship with warehouse-club retailer Costco Wholesale Corp., heavy competition and declines in corporate travel budgets.

"The last couple of years have been an important transition period, and we've entered 2017 stronger, more focused and more resilient," said Chief Executive Kenneth Chenault.

Results again were dragged by the end of the company's relationship with Costco. AmEx's revenue slipped 2.5% to $7.89 billion. Excluding the Costco business and the impact of a stronger U.S. dollar, revenue rose 6.6%. Analysts were looking for $7.75 billion, according to Thomson Reuters.

Card member spending grew 8% during the quarter, excluding the impact of Costco in the year-earlier period and the effect of the stronger dollar.

Best known for its charge cards that require customers to pay their bills in full every month, AmEx is expanding its credit-card portfolio allowing customers to carry a balance. The company also last year ramped up marketing and promotions on its platinum charge card.

"We acquired 2.6 million new cards across our global issuing businesses during the quarter and continued to broaden our reach among millennials with an expanded merchant network and enhanced benefits and services to earn a greater share of their wallet," said Mr. Chenault.

The company backed its 2017 outlook, for earnings of $5.60 to $5.80 a share.

In all for the first quarter, American Express reported a profit of $1.2 billion, or $1.34 a share, down from $1.4 billion, or $1.45 a share, a year earlier. Analysts, on average, were expecting $1.28 a share.

Total expenses climbed 10%, to $1.6 billion, mostly owing to higher rewards expenses, largely driven by recent product enhancements and higher card member spending.

Write to Anne Steele at Anne.Steele@wsj.com

(END) Dow Jones Newswires

April 19, 2017 16:50 ET (20:50 GMT)

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