American Express AXP-N kept its forecast for full-year profit unchanged on Friday, disappointing investors and overshadowing its quarterly results that topped estimates on record card member spending by its young and affluent customers.
While spending on its cards touched a record high in the second quarter, AmEx’s cautious forecast for the year points to a potential slowdown in consumer spending, which has remained resilient despite a series of interest rate hikes by the U.S. central bank to tame inflation.
AmEx shares were down 4 per cent in premarket trading as the credit card giant reaffirmed its per-share profit forecast of $11 to $11.40 for 2023. Analysts on average expect $11.11 per share, according to Refinitiv.
Referring to AmEx’s forecast revision during the COVID-19 pandemic in 2020, CFO Jeff Campbell told Reuters that AmEx only alters its outlook if something “wildly different” happens.
AmEx’s total provisions for credit losses came in at $1.2-billion in the second quarter, compared with $410-million a year earlier.
“Card member spending hit another all-time high,” CEO Stephen Squeri said in a statement. Total network volumes climbed 8 per cent to $426.6-billion in the second quarter ended June 30.
AmEx has so far been largely spared from the impact of rising prices for everything from energy to groceries as its young and well-heeled customer base carries on with shopping, dining out and travel.
The company said Millennial and Gen Z consumers remained its fastest-growing customer cohort, representing 60 per cent of new consumer accounts acquired globally, while spending by the group increased 21 per cent in the U.S. compared to a year earlier.
“Across all demographics, all customer types, all geographies, travel and entertainment spend is just very strong,” Campbell said.
The credit card company reported a profit of $2.89 per share in the quarter, beating analysts’ average expectation of $2.81 per share.
Total revenue, net of interest expense, rose 12 per cent to a record $15.05-billion but fell short of expectations of $15.48-billion.