American Express Spending More to Attract Cardholders, CEO Saysby
AmEx working with `great sense of urgency,' Chenault says
Card issuer got vote of confidence from Buffett last weekend
American Express Co., the biggest U.S. credit-card issuer by purchases, is spending more money to attract cardholders and actively seeking retail partners as it works “with a great sense of urgency” to improve results, Chief Executive Officer Ken Chenault told shareholders.
AmEx has “ramped up spending on cardmember acquisition,” Chenault said at the company’s annual meeting in New York, while conceding that 2015 was a “disappointing” year for investors. He didn’t elaborate on the firm’s spending.
The lender has sought to reverse its worst stock slump since the recession after announcing last year it would end its U.S. partnership with Costco Wholesale Corp., a relationship that accounted for 20 percent of worldwide loans. As increased competition has pressured margins, Chenault, 64, has shuffled his management team and in March announced a renewed focus on lending to bolster profitability at the firm.
The credit-card issuer received a vote of confidence over the weekend from Warren Buffett, whose Berkshire Hathaway Inc. is AmEx’s largest shareholder.
“I personally feel OK about American Express, and I’m happy to own it,” Buffett said Saturday at Berkshire’s annual shareholders meeting in Omaha, Nebraska. AmEx’s position in the industry “has been under attack for decades -- more intensively lately -- and it will continue to be under attack. It’s too big a business, and too interesting a business.”
In an interview with CNBC on Monday, Buffett said he loves AmEx’s decision to repurchase stock and he agrees with the company’s decision to walk away from Costco. AmEx said last month that marketing and promotion expenses increased 19 percent in the first quarter from a year earlier.
AmEx’s relationship with Starwood Hotels & Resorts Worldwide Inc., with which it has a co-brand deal, remains “business as usual,” Chenault said Monday. The AmEx Starwood Preferred Guest card, which accounts for about 4 percent of the company’s loans and 2 percent of total spending, is at risk of extinction after Marriott International Inc. won a bidding war for Starwood, some analysts have said. Marriott has its own co-brand deal with JPMorgan Chase & Co., the largest U.S. credit-card lender, and Visa Inc., the world’s biggest payments network.
Starwood doesn’t represent “a major portion” of AmEx’s billings, Chenault said, while adding that the firm is “focused very hard on doing the best for Marriott, Starwood customers.”
American Express shares have slid 5.7 percent this year and 28 percent since Nov. 6, 2014, when Bloomberg News reported that Costco was considering replacing AmEx as its credit-card issuer in the U.S.