American Express has announced the new Platinum Business Card.
Provided by: American Express
american express Even companies that offer credit cards to the wealthy have found it beneficial to focus on high rollers.
The company recently shifted marketing funds from its no-fee cash-back card to its revamped Platinum Card, which has an annual fee of $895, CEO Stephen Squery told analysts Friday after announcing fourth-quarter results.
Doing so will boost overall spending levels as high-end consumer growth continues, executives said, a strategy that will both increase fee income from premium cards and reduce loan defaults.
“We have the ability to be very flexible with our marketing investments and have seen tremendous demand for our premium products, particularly the Platinum Card,” Squery said.
“The platinum portfolio is growing at such a fast pace that the overall premium for the portfolio is increasing over time,” he added.
AmEx’s strategic shift is the latest example of the so-called “K-shaped” U.S. economy developing, where wealthy consumers continue to spend freely while others rein in their spending. Card issuer data shows demand for high-end products and luxury experiences is accelerating, while the pace of growth in purchases in more basic categories is slowing.
Spending at luxury retailers rose 15% in the quarter, business and first class ticket purchases rose 9% and luxury hotel spending rose 12%, CFO Christophe Le Caillec said in an interview with CNBC.
Meanwhile, spending on airlines and lodging generally rose 3% and 5%, respectively, in the quarter, showing that the wealthiest cardholders are driving the performance.
Card growth slows down
The commentary helped allay analysts’ concerns that last fall’s relaunch of the expensive Platinum card might not have worked.
AmEx said Friday that the number of new card accounts reached 2.9 million at year-end, down from the third quarter and the lowest number in five quarters as the company focused on more profitable card products.
“We are increasingly concerned that the Platinum card refresh is not generating much traction,” said BTIG analysts led by Vincent Kaintic, citing new competition from other card issuers and consumer fatigue with high fees and onerous benefits.
The company did not disclose the total number of cardholders, including the Platinum Card, but Squery told analysts on Friday that “all the metrics we are looking at speak to the fact that this was a very successful product launch.”
Still, AmEx stock fell about 3.5% in midday trading after the company’s results and guidance disappointed some.
Earnings per share were $3.53, just a penny below consensus estimates, according to LSEG.
The company said this was partly due to higher-than-expected costs to revamp Platinum, which came to $14.5 billion.
“If there’s a problem, it’s probably that Q4 clearly shows the cost of platinum renewals, but not the corresponding increase in new accounts,” Trust analyst Brian Foran wrote in a research note.
