American Express Co.'s customers reduced spending by 16% in the first quarte

Discussion in 'Wall St. News' started by ASusilovic, Apr 24, 2009.

  1. American Express Co.'s customers reduced spending by 16% in the first quarter, sending the company's quarterly net income down 56%.

    In addition to cutbacks in spending, American Express also is being hit hard by rising delinquencies as higher unemployment and a slumping U.S. economy take their toll on even the company's high-end customers. Rapidly souring credit-card loans forced the company to increase its loss reserve by 49%.

    American Express reported first-quarter net income of $437 million, or 31 cents a share, down from $991 million, or 85 cents a share, in the year-earlier period.

    The results are a stark reminder of how the on-going economic crisis, initially triggered by cash-strapped homeowners with poor credit, has spread to even well-heeled consumers as joblessness and economic insecurity surge.

    Investors, who had driven up American Express shares by 7.93% to $20.97 at the close of regular trading Thursday on the New York Stock Exchange, pushed the shares up a further 6% in after-hours trading.

    The company reported rising delinquencies and write-offs. American Express set aside $1.8 billion to cover credit losses, up 49% from $1.21 billion in the year-earlier period.

    "Spending levels reflected the severe recessionary environment, but remained fairly consistent throughout the quarter," Chief Executive and Chairman Kenneth Chenault said in a statement. The company expects the U.S. unemployment rate to rise to 9.7% by the end of 2009 from the current 8.5%, the highest level since 1983.

    Revenue dropped 18% from a year ago to $5.9 billion, falling short of analysts' estimates of $6.45 billion, according to Thomson Reuters.

    The company's U.S. card business reported a loss of $25 million in the first quarter, down from $523 million a year earlier. The company wrote off 8.5% of its loans, up from 6.7% in the fourth quarter and 4.3% in the year-earlier period. Compared to the first quarter, American Express estimates losses on card loans could increase by as much as 2 percentage points to 2.50 percentage points in the second quarter, and another half-percentage point in the third quarter, before leveling off in the fourth quarter.

    To offset losses from souring card loans, American Express plans to further reduce expenses. This would include another round of job cuts.
  2. To quote David Rosenberg "US consumers are shifting from frivolity to frugality" :cool:
  3. clacy


    Not only are consumers getting tight with their cash, but I've seen first hand many major medical, biotech, pharmaceutical companines that dramatically changing the way they look at expenses and spending in general.

    This thing isn't over yet, and we are watching a paradigm shift, in my opinion in regards to the way spending/credit/frugality is looked at.
  4. Average spending per person per day in U.S. so far this year is $61; last year, average per day per person spending average $93.

    The change in one year is drastic and the trend is even more alarming.
  5. LOL

    Thanks for that. :)
  6. Short it!:D