By Saabira Chaudhuri and Daniel Huang
American Express Co. said it would cut 4,000 jobs as it reported
a rise in expenses that disappointed investors eager for the
company to show more spending discipline.
The layoffs, affecting about 6% of American Express's 63,000
workforce, are part of a broader restructuring to boost efficiency,
company officials said on a conference call to discuss quarterly
results Wednesday afternoon.
Amex's revenue and profit increased but not enough to satisfy
investors who have grown increasingly demanding of the company's
results as the economy grows, consumers get more financially
healthy and more people turn in their checks and cash to use
plastic.
The New York-based credit-card company run by Chairman and Chief
Executive Kenneth Chenault saw its shares drop about 2% in trading
after the market closed. The company reported an 11% rise in
quarterly profit after the close.
Fourth-quarter profit was $1.45 billion, or $1.39 a share,
compared with $1.31 billion, or $1.21 a share, a year earlier.
Revenue, net of interest expense, rose 6.6% to $9.11 billion from
$8.55 billion a year earlier, helped by a gain on the sale of
American Express's investment in Concur Technologies, an
expense-management software company.
Analysts surveyed by Thomson Reuters expected a profit of $1.38
a share on revenue of $8.53 billion.
While some analysts had expected AmEx to show strong expense
controls, the firm reported that companywide expenses came in at
$6.3 billion, up 3%, or 6% when adjusted for foreign-exchange
impacts, from a year earlier.
Another sign that the company hasn't cut sharply enough for some
investors: Despite previous layoff announcements, Amex's overall
head count has remained relatively steady between 61,000 and 63,500
since 2010, according to the firm's annual reports. Amex said that
it had used a big part of the gain on its Concur sale on
restructuring initiatives. That may lead to cost savings later, but
in the fourth quarter, it led to a pretax charge of $313
million.
"A substantial gain allowed us to accelerate some critical
initiatives: re-engineering to make American Express more
efficient," Mr. Chenault said in prepared remarks.
American Express also spent more during the period on marketing
and promotion and renewing its partnership with Delta Air Lines.
The company is revving up partnerships with merchants, from Apple
Inc. to McDonald's Corp. to Uber to promote mobile payments and its
rewards programs.
Wednesday, American Express, which both issues credit and charge
cards and owns a processing network, said card-member spending rose
6%, while U.S. loan balances increased 7%. The provision for loans
that could sour came in at $582 million, up 22% from a year
ago.
Last month, Mr. Chenault said the company was seeing strong
holiday spending and that Cyber Monday, the busy online shopping
day after Thanksgiving, represented the single largest day of
customer spending through its cards in the company's history.
"We've made very good progress against the backdrop of an uneven
global economy and the negative impact of a strengthening U.S.
dollar," Mr. Chenault said on Wednesday, even as he cautioned that
the company faces "competitive and regulatory challenges."
AmEx of late has been falling short of its longtime
revenue-growth target of 8%, but the company has been able to meet
earnings expectations, in part by controlling expenses.
Also Wednesday, Discover Financial Services posted a 7% increase
in fourth-quarter net interest income, but revenue declined and
earnings fell below analysts' estimates due in part to changes in
the company's customer rewards program.
Discover reported a profit of $404 million, down 33% from $602
million a year earlier. On a per-share basis, earnings were 87
cents, down from $1.23. Earnings excluding items were $553 million,
or $1.19 a share.
Analysts polled by Thomson Reuters had projected earnings of
$1.30 a share on revenue of $2.2 billion. These estimates generally
exclude nonrecurring items.
Shares fell about 3% in after-hours trading.
Revenue net of interest expenses fell 4% to $2.04 billion from
$2.13 billion a year ago, reflecting a charge related to a
simplification of the company's Cashback Rewards program. The total
fell short of the $2.2 billion analysts expected, on average.
The change involves the elimination of Discover's credit-card
rewards forfeiture reserve and will make rewards easier for
customers to redeem. Overall, the company said in November it would
post about $178 million of fourth-quarter charges related to the
change.
"We think the changes will be beneficial for our company and
have been receiving favorable feedback from our card members," said
Chief Executive David Nelms.
Josh Beckerman and Robin Sidel contributed to this article.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com and Josh
Beckerman at josh.beckerman@wsj.com
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