Chenault Sees AmEx Overcoming Costco Loss, Sticks to ForecastsSteven Crabill
American Express Co., the lender that’s ending partnerships with Costco Wholesale Corp. and JetBlue Airways Corp., can still attain long-term revenue and profit forecasts, Chief Executive Officer Kenneth I. Chenault said.
“Clearly we face some challenges over the next two years,” Chenault, 63, said Wednesday during his company’s annual investor day in New York. “But I’m confident in our ability to deliver against the objectives we’ve set.”
AmEx’s revenue last year rose 4 percent, short of an 8 percent goal. Still, Chenault said that long-term target is still achievable, along with earnings-per-share growth of 12 percent to 15 percent.
Competition is getting stiffer, with rival U.S. card issuers sweetening rewards and wresting partnerships to erode AmEx’s dominance among big spenders. That’s pressuring AmEx to burnish offerings to keep current cardholders happy and lure new ones. Charles Munger, Berkshire Hathaway Inc.’s billionaire vice chairman, said the lender’s competitive advantage may be eroding.
“American Express has had a long period of achievement and prosperity,” Munger said Wednesday during the annual meeting for Los Angeles-based Daily Journal Corp., where he’s chairman. “It doesn’t look quite so easy as it once did.”
Berkshire, led by Chairman Warren Buffett, is the biggest shareholder of American Express. Munger, 91, is on the board of Costco. Renewing AmEx’s 16-year agreement with the Issaquah, Washington-based retailer would have been too expensive, Chenault said. “The numbers didn’t add up,” he said.
After fourth-quarter costs climbed 3.5 percent to $6.3 billion, AmEx said it will eliminate more than 4,000 jobs this year.
Last week, AmEx announced a venture with Charles Schwab Corp. to create two co-brand cards, and it recently renewed deals with Starwood Hotels & Resorts Worldwide Inc. and Delta Air Lines Inc.
AmEx also said it’s starting a loyalty program called Plenti that will let customers earn and spend points at a variety of retailers. The company also recently announced plans to bolster perks for its gold cards, adding a personalized travel service and more points for dining out.