American Express is determined to minimize the damage from losing profitable Costco cardholders in Canada and the U.S., and is taking steps to keep as many of those customers in the Amex fold as possible.

"The battle for the hearts and minds of our customers is still in the early stages," said Jeff Campbell, chief financial officer for American Express, referring to his company's efforts to convert an estimated 10 million co-brand Costco cardholders to another Amex card.

The card brand boasted of the addition of three million new card accounts in its first quarter 2016 earnings report, with a portion of the 2.1 million new domestic accounts coming from converting Costco cardholders to other Amex products. Almost two-thirds of these consumer acquisitions came through the company's digital channels.

The transfer of the U.S. Costco portfolio to Citigroup, which outbid American Express for the Costco relationship, is expected to take place in June. American Express continues to estimate the sale of its card portfolio and attached credit card loans to Citigroup will close at $1 billion.

The sale of such a large portfolio to a competitor is "an unprecedented change in the industry," Campbell said April 20 during an earnings conference call. "That makes us slightly cautious about our own forecasting in terms of how consumers will behave."

Costo co-brand cardholders may have other Amex products already, but it is not certain how the portfolio sale will affect their spending habits, Campbell added.

"There are some Amex cardmembers, not just the Costco co-brand members, who traditionally do some portion of their shopping at Costco, so we have to see how their behavior changes as well," Campbell said.

American Express is being cautious about its financial outlook for the second half of 2016, in part because of the timing of the Costco portfolio sale, but also because it can take a couple of years to determine the spending habits of these new cardholders, Campbell said.

"You're going to see the real financial impact of new accounts in the second or third year," Campbell added.

Even with the challenges of the Costco departure looming over its head and a dip in net income from a year earlier, American Express was able to deliver higher-than-expected profits because of an increase in card spending. Net income fell to $1.43 billion in the first quarter of 2016, compared with $1.53 billion in 2015. Revenue increased to $8.09 billion, a 1.6% increase.

The company announced a management overhaul earlier this year and budget trims that would cut $1 billion in costs over the next two years.

In March, American Express cut CEO Kenneth Chenault's pay 26% to the lowest level for its company leader since 2008. Chenault did not participate in the April 20 earnings call.

In the meantime, American Express looks to fill the gap left by the Cosco exit with other partnerships that address millennial shoppers, such as a deal with Boxed Wholesale, an online Costco rival.

Amex did not address Marriott's pending acquisition of Starwood Hotels and Resorts Worldwide. But investors are watching closely as Amex's long relationship with Starwood could be jeopardized by Marriott's co-brand relationship with JPMorgan Chase.

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