AmEx Investors Seek Revenue Boost as Firm Cuts Costs, Reshuffles

  • Stock rises less than 1% after CEO announces sweeping overhaul
  • CEO Chenault: `We must transform the way the company works'

American Express Co.’s $1 billion cost-cutting target and management changes announced on Wednesday did little to reverse its stock rout as investors and analysts wait to see whether the moves will succeed in boosting revenue.

The measures -- creating and reshaping units while reassigning more than a half dozen senior managers -- mark Chief Executive Officer Ken Chenault’s most sweeping overhaul yet to rejuvenate earnings growth and end a share slide that began in late 2014. The stock, down 23 percent this year, gained 0.8 percent on Wednesday. That lagged behind the 1.6 percent advance of the Dow Jones Industrial Average.

While AmEx said initiatives including a new global marketing operations unit should help accelerate revenue growth, analysts said they’re looking to see how the new configuration will help bolster market share, preserve partnerships and tap new business.

“I would like to have more -- more in terms of not just expense cuts, but also, how do you plan to grow the business?” said Vincent Caintic, an analyst with Macquarie Group Ltd. “How do you plan to defend what you have right now? What is the strategy for the next three years, the next five years?”

Eliminating Jobs

AmEx has said quarterly results will be uneven as the company spends money to attract new customers while losing its biggest partner, Costco Wholesale Corp. Chenault, 64, also reiterated Wednesday that organizational changes will result in a number of job cuts across the firm. “At this time, we do not know what the magnitude of those reductions will be, as decisions on specific positions affected are yet to be made,” he said in a statement.

The new marketing operations unit will be led by Mike McCormack, who will report to Tammy Weinbaum, executive vice president of global business services, the company said. Chief Marketing Officer John Hayes is leaving after 21 years at the firm, while Elizabeth Rutledge was named head of global advertising and media. The company is creating an enterprise digital group to centralize Web, mobile and digital products under Luke Gebb. It also said it’s merging world service and global credit administration units into a single business overseen by Raymond Joabar.

As the payments industry evolves “we must transform the way the company works,” Chenault said.

The New York-based firm should also enlist outsiders as it seeks ways to boost profits, Moshe Orenbuch, a Credit Suisse Group AG analyst, said after the announcement.

“They would benefit from having outside views of their programs, both their card programs and reward programs,” he said.