- Marketing costs expected to jump 15% this year, company says
- Full-year profit guidance climbs after sale of Accertify
American Express Co. said it’s planning to increase spending on marketing even as billings growth on the company’s credit cards slowed in the second quarter.
Shares of the payments giant fell the most in nine months after the company said it now expects marketing expenses to be about $6 billion for the year, or about 15% higher than they were in 2023.
“As we look out there in the marketplace, we think the opportunity to acquire new cardholders that meet our requirements is still very, very strong,” Chief Executive Officer Steve Squeri said in an interview Friday. When it comes to consumers’ spending, “where you see a little bit of softness — just a little bit — is some of the discretionary spending around travel.”
Amex is leaning in to marketing with the hope of adding more customers even as a growing chorus of bank executives have warned that spending on credit cards has slowed in recent months and write-offs across the industry have increased. But the company is known for its tight underwriting and recently fared the best of its peers in the Federal Reserve’s annual stress tests, which mimic a hypothetical recession.
Amex continues to benefit from relatively low levels of loan losses, and provisions in the second quarter were better than analysts anticipated. Still, the company’s billed business rose just 5% to $388.2 billion in the second quarter, missing the $391.6 billion average of analyst estimates compiled by Bloomberg.
“We’re not making this investment because of a slowdown in billings,” Squeri told analysts on a conference call. “We do see the opportunity within the credit box and within the dimensions of who we’re looking for in our cardholders.”
The shares fell as much as 4.6% to $237.65 in New York, the biggest intraday drop since Oct. 20.
Even with the increased spending on marketing, Amex raised its full-year guidance for profit to $13.30 to $13.80 a share after it booked a gain tied to the sale of its fraud-prevention provider, Accertify. The previous forecast was $12.65 to $13.15.
Amex had previously warned it might have to use a substantial portion of that gain to fund its core business.
“We are able to fund significantly more investments from our core business than our expectation at the start of the year without relying on the one-off gain from Accertify,” Chief Financial Officer Christophe Le Caillec said on a conference call with analysts.
Premium Cards
As part of its efforts to lure in new customers, Amex is also planning to refresh the perks on a bevy of its most popular cards, including its Gold card. Amex is known for premium cards that attract legions of young consumers willing to pay hundreds of dollars in annual fees in exchange for tony perks and access to the firm’s airport lounges.
The company continued its pursuit of consumers focused on travel and leisure during the quarter with the acquisition of Tock for $400 million from Squarespace Inc. Amex has long curated its offerings to encourage already-willing spenders to spend more, and Tock, which offers reservations, table management and event ticketing to around 7,000 restaurants and other entertainment outlets, complements that goal.
Customers in the Millennials and Generation Z age cohorts are Amex’s fastest-growing segment, Squeri said.
“Millennial and Gen Z is still the engine,” Squeri said in a separate interview with Bloomberg Television. “We’ve unlocked an entirely new segment for ourselves over the last few years.”
Written by: Paige Smith and Jennifer Surane @Bloomberg
The post “Amex Shares Fall Most in Nine Months as Billings Growth Slows” first appeared on Bloomberg
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