The American Express fourth-quarter earnings report released last week was positive on several fronts, including cardmember spending and overall revenue, but that won’t be any consolation for over 5,000 employees who will lose their jobs – mainly in the credit issuer’s travel division.
In an effort to cut costs and restructure the company, American Express said that 5,400 employees would be let go. The company anticipates an overall reduction of 4-6% in staffing this year.
“For the next two years, our aim is to hold annual operating expense increases to less than 3%. The overall restructuring program will put us in a better position as we seek to deliver strong results for shareholders,” according to American Express CEO Kenneth Chenault.
Fourth quarter revenue strong
American Express reported net income in the last quarter of 2012 at $637 million. Adjusted net income was $1.2 billion ($1.09 per share) compared with $1.01 per share during the same time period in 2011.
The adjusted net income reflected three major costs:
- $400 million to restructure the company ($287 million after taxes)
- $342 million to enhance the redemption process for American Express Membership Rewards ($212 million after taxes)
- $153 million to reimburse cardmembers as a result of a government investigation settled last October ($95 million after taxes)
Cardmember spending took a small hit during Hurricane Sandy in late October and early November, but rebounded and was 8% higher overall than it was the previous year. The write-off rate was 2%, a historic low.
Of the company’s overall performance in 2012,Chenault said highlights included launched products for new customer segments and expanded internationally.