Credit card company American Express said Wednesday that its first quarter profit fell 13 percent from a year earlier, as the company continues to deal with the aftermath of losing its partnership with warehouse chain Costco.
The New York-based company said it earned $1.24 billion in the quarter, down from $1.43 billion in the same period a year earlier. American Express earned $1.34 a share compared with $1.45 a share a year ago. That beat analysts’ forecasts of $1.28 per share, according to FactSet.
The drop in profits from a year earlier mostly has to do with the fact that American Express still had the Costco co-branded credit card in 2016. That partnership ended in June. Before the divorce, Costco represented a sizeable portion of American Express’ credit card loans and its billed business. To recover, AmEx has been more aggressively marketing its products, as well as making changes to products like the Platinum Card to entice more customers.
“The results reflect many of the investments we’ve been making to grow the business, plus continued progress in reducing operating expenses,” said American Express Chairman and CEO Kenneth Chenault.
Removing Costco, AmEx had a relatively strong quarter. Card member spending, a key metric for how often American Express customers are using and spending on their card, was up 14 percent from a year earlier. AmEx charges a small fee to a merchant every time an American Express card is used.
More customers are keeping a balance on their cards as well, which is good for AmEx since it can charge interest. American Express’ bread and butter are charge cards, which means the balance has to be paid off at the end of every month.
American Express had first-quarter revenue of $7.9 billion, down 2 percent from $8.1 billion in the same period a year earlier.
AmEx shares rose 2 percent in after-hours trading to $77.22.