American Express posted a 6 percent increase in profits for the first quarter, but the company’s results took a hit from a stronger U.S. dollar.
Here’s a breakdown of AmEx’s results:
DOLLAR ISSUES: American Express had a decline in revenue in the quarter, most of which can be attributed to a stronger dollar. A stronger dollar makes goods purchased internationally worth less when compared to dollars. AmEx is particularly exposed to currency fluctuations when U.S. customers buy products internationally when they travel, but their accounts are denominated in dollars.
In a conference call with investors, AmEx executives said they expect a stronger dollar to impact its results “for the rest of the year” if the dollar remains at current levels.
CARD SPENDING: AmEx did benefit from a notable increase in cardmember spending in the quarter. Credit-card billings on American Express cards rose 3 percent from a year earlier, but would have climbed 7 percent if it hadn’t been for a stronger dollar. Average cardmember spending outside the U.S. also fell due to a stronger dollar, while U.S card spending was up 7 percent.
CUTTING COSTS: To boost profitability, AmEx cut costs in the quarter. Overall expenses were down 5 percent, and salaries were down 15 percent. Earlier this year, AmEx announced it would lay off 4,000 workers.
TOUGH QUARTER: The results come at a challenging time for the company. American Express lost its exclusive relationship with Costco and lost a U.S. antitrust suit.
BOTTOM LINE: American Express on Thursday said its first-quarter net income rose to $1.51 billion. On a per-share basis, the company earned $1.48, up from $1.33 a year earlier. The results topped Wall Street expectations. The average estimate of 14 analysts surveyed by Zacks Investment Research was for earnings of $1.37.
The credit-card issuer and global payments company had revenue of $7.95 billion for the quarter, which fell short of Wall Street forecasts. Seven analysts surveyed by Zacks had expected $8.21 billion.
American Express shares have declined 13 percent since the beginning of the year, while the Standard & Poor’s 500 index has climbed 2 percent.
In after-hours trading, American Express shares dropped $1.26, or 1.6 percent, to $79.65.