American Express Spending Decline Slows in Fourth Quarter
By Allison Prang
American Express Co. logged a smaller drop in spending in the
last quarter of 2020 compared with recent periods, showing
potential signs of a recovery amid the Covid-19 pandemic which has
kept people at home and damped spending on travel.
Total spending at American Express fell 15% in its fourth
quarter from a year earlier. By comparison, spending was down 19%
in the third quarter and tanked by more than one-third in the
As the world grapples with lockdowns and people stay home during
the pandemic, travel and entertainment spending has taken a
particularly hard hit, plummeting 65% in the last quarter of 2020.
That steep decline improved slightly from the third quarter when
that measure of spending fell 69% from a year earlier. In the
second quarter of 2020, it plummeted 87%.
Within travel and entertainment, spending on restaurants has
been the most resilient during the pandemic, said Chief Financial
Officer Jeff Campbell on the company's earnings call, but he noted
it decelerated in the last quarter because of dining restrictions
and colder weather. Mr. Campbell told analysts that the company
expects that by the fourth quarter of 2021, travel and
entertainment spending will be around 70% of what it was in the
comparable quarter of 2019.
On the company's call, Chief Executive and Chairman Steve Squeri
said "I believe that as we get into this summer season, this June,
July, August and September, you will see a rush for people to
Spending not related to travel and entertainment rose 4% in the
company's fourth quarter year over year, which was slightly better
than the 1% gain it posted in the third quarter. It had fallen 13%
in the second quarter of 2020. When adjusting for the effects of
foreign exchange, the company said online spending and holiday
spending increased among its consumer business.
American Express -- similar to many of the country's major banks
-- also reported a benefit related to a $674 million reserve
release in the quarter. Mr. Campbell said in an interview that the
American Express consumer is strong and that measures of credit
quality at the company are faring well.
Mr. Campbell said in an interview that the American Express
consumer is strong and that measures of credit quality at the
company are faring well.
"The health of the consumer when you look at the demographic
that we serve is actually remarkably strong and that's why the
actual credit metrics that we see in terms of low delinquencies,
low levels of write-offs are the lowest we've seen in years," Mr.
Campbell said. "You still have a tremendous level of government
lockdowns, a tremendous level of border controls...but we see a lot
of pent-up demand waiting for the medical situation to get a little
Overall, American Express's revenue, net of interest expense,
was $9.35 billion, down from $11.37 billion in the same period a
year earlier. Analysts were expecting $9.34 billion.
The company reported $1.44 billion in profit, down from $1.69
billion. Earnings were $1.76 a share, down from $2.03 a share.
Analysts were expecting $1.31 a share, according to FactSet.
Shares of the American Express fell 2.8% Tuesday morning.
(END) Dow Jones Newswires
January 26, 2021 12:39 ET (17:39 GMT)
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