Western Union Co. is banking on a major restructuring of its U.S. operations to boost its profit margins by the end of next year.
The Englewood, Colo., company said Tuesday that it would save $10 million this year and $30 million next year and beyond through the elimination of more than 650 positions, including the closing of its unionized call centers in Missouri and Texas.
"Operating income margin improvement is an ongoing objective for Western Union, and we have as a goal margin improvement of up to 50 basis points in 2009," Christina Gold, its chairman and chief executive officer, said during a first-quarter earnings call with investors.
Western Union recorded $24 million of restructuring costs for the first quarter, and it said it expects to record $69 million for the full year.
Larry Berlin, an analyst with First Analysis Corp. in Chicago, said the targeted increase in the profit margin does seem moderately possible.
But David Scharf, an analyst with JMP Securities LLC. in San Francisco, said it would be a "challenge" for Western Union to reach its goal.
The restructuring, which includes outsourcing many operations abroad, "helps get them there a little bit," Mr. Scharf said. "But as we know, the overall mix of business … becomes more and more weighted to international transactions, which tend to be lower-margin than the domestic business."
First-quarter revenue and volume in international transactions — which account for half of all Western Union revenue — each increased 19% from a year earlier, with particularly strong gains in China and in India, the two countries that receive the most remittances.
In the U.S. market, revenue declined 8%, and transactions fell 3%. Remittances to Mexico, which have been pressured for the past several quarters by the immigration debate and the sluggish U.S. housing market in which many Hispanic immigrants are employed, made a modest rebound, with revenue rising 1% and transactions rising 2%.
Mr. Berlin said the slowing U.S. and global economy was less of a concern for Western Union, because global immigration rates remained high.
"As you grow the number of immigrants, you grow the number of people sending money," even if they are moving to countries other than the United States, he said.
All told, Western Union said its first-quarter profit rose 7%, to $207 million. Earnings per share increased 8%, to 27 cents, or a penny higher than the average estimate of analysts. By early afternoon Tuesday shares of Western Union had climbed about 2% from Monday's close.
