By Angela Chen
Costco Wholesale Corp. on Monday named Citigroup Inc. and Visa
Inc. as its new credit-card partners, replacing American Express
Co. as the exclusive credit-card network at its stores beginning in
April of next year.
Citi will become the exclusive issuer of Costco's co-brand
credit cards, and Visa will replace American Express as the credit
card network for Costco's stores.
Visa shares rose 2.3% premarket, while Citi edged up 0.6%.
Meanwhile, Capital One Financial Corp. and Mastercard Inc. declined
1.7% and 1.2%, respectively.
Last month Costco and AmEx announced the coming end of a 16-year
partnership in which Costco only accepted AmEx cards. In addition,
AmEx and Costco issued a credit card together that could also be
used at other merchants. The unusual partnership had driven a
significant chunk of business to the New York card company.
The announcement in February that the companies would end the
deal pummeled AmEx's stock price and served as a fresh blow to
AmEx, which was already falling short of some sales targets.
The Wall Street Journal previously reported that AmEx had
approached Costco several months ago to renew the relationship,
prompting the wholesale club to open up the process to other
potential partners, according to a person familiar with the
discussions. Costco had sought more favorable terms from AmEx, the
person said.
AmEx, which issues credit and charge cards and owns a processing
network, said it had been unable to reach a new agreement with
Costco on terms that "would have made economic sense" for the
company.
In the past decade, Costco has more than doubled its annual
revenue to $112.6 billion for the fiscal year ended Aug. 31 and
nearly doubled profits to $2.06 billion. Throughout that time,
customers couldn't make purchases with credit cards branded by Visa
Inc., MasterCard Inc. and Discover Financial Services. Costco,
however, does accept debit cards from Visa and MasterCard.
Such partnerships, called "co-brands," are established to build
loyalty among specific types of customers.
Write to Angela Chen at angela.chen@dowjones.com
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