Credit card spending growth slowed down, and American Express (AXP.US) expects marketing spending to increase by about 15% year-on-year this year.
Friday premarket, payment giant American Express (AXP.US) reported its second-quarter earnings. The company said it saw a moderation in its second-quarter credit card billings growth and warned that it plans to increase marketing spending in the coming months.
The data showed that the company's Q2 revenue came in at $16.3 billion, up from $15 billion a year ago, a 8% year-over-year increase, above the consensus estimate of $16.6 billion. Net income was $3.02 billion, or $4.15 per share, up from $2.17 billion, or $2.89 per share, a year ago. Adjusted earnings per share was $3.49, above the consensus estimate of $3.23.
Second-quarter, total transaction volume (a measure of customer spending on the company's credit cards) increased 5%, to $38.82 billion, but below the consensus estimate of $39.16 billion.
The company's chief executive, Steve Squeri, said in a statement Friday that the company currently expects its marketing spend to be up about 15% year-over-year from 2023, including the proceeds from the sale of its fraud services provider Accertify.
Despite the increase in marketing spending, American Express is still raising its full-year earnings per share guidance to $13.30 to $13.80, including the proceeds from the Accertify sale. The previous guidance was $12.65 to $13.15.
Squeri said: "Based on the strong performance of our core business, we believe we can increase our marketing investment by about 15% year-over-year without using any transaction revenue while still delivering outstanding results this year." As a result, the company is incorporating all of the proceeds from the Accertify sale into its 2024 guidance.
During the Fed's annual stress test, American Express performed the best. However, the company's second-quarter loan loss reserves increased 8.3% to $1.3 billion, due to an increase in net charge-offs.
Last month, American Express also agreed to buy Tock, a restaurant reservation platform from Squarespace (SQSP.US), to expand its footprint in the restaurant industry.
Analysts said the acquisition could support American Express' efforts in the small and medium-sized business market. While recent spending growth in the SMB market has slowed, American Express believes the segment is profitable.
As of the time of publication, the stock was trading down about 2% premarket.