Richest Amex Cardholders Spend Less on Non-Essential Items
They may not be leaving home without it, but wealthy American Express cardholders seem to be keeping the credit card in their wallets and purses.
American Express says its most affluent cardholders spent less on discretionary purchases in the second quarter of this year, which contributed to unexpectedly weak earnings. The company is warning that a deteriorating economy is choking off earnings growth.
The effects of the economics downturn have been so strong, according to AmEx, that even its most creditworthy, long-term customers are feeling the effects of the slowdown sweeping the U.S.
Last week American Express reported a 38 percent slide in second-quarter earnings. The firm also said it will not be able to meet long-term financial targets until the economy shows signs of improvement. American Express is known for catering to wealthier customers, so some investors were expecting the company to withstand the economic slowdown relatively well.
AmEx plans to reduce staffing and other costs, and it expects resulting charges to affect results in the second half of this year.
Amex isn’t the only credit-card company to be affected by slumping house prices, slowing economic growth and rising unemployment. Discover Financial Services has announced that it expects to report higher charge-offs later this year. And Capital One Financial has reported a 40 percent drop in second-quarter net income.
– By Ed Coury, senior editor and Midwest bureau chief for the Wall Street Journal Radio Network, Dow Jones & Co., and a reporter for WWJ Newsradio 950
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