Increased consumer spending and rewards redemptions helped all three of Alliance Data Systems Corp.’s business units, including private-label card services, to report significant first-quarter gains, the company announced April 19.
Net income for the quarter ended March 31 was $115.2 million, up 33.3% from $86.4 million during the same period last year. Revenue was up 20.4%, to $891.6 million from $740.4 million, the issuer of private-label cards said.
The Dallas-based company’s Private Label Services and Credit unit generated $407.3 million in revenue, up 10.4% from $368.9 million a year earlier. Credit card sales were up 20%, to $2.34 billion from $1.95 billion, because of strong cardholder spending coupled with the ramp-up of programs added during 2011, Alliance Data noted in its earnings news release. Average receivables for the quarter were $5.32 billion, up 7% from $4.97 billion, the company said.
During a conference call with analysts, Charles Horn, executive vice president and chief financial officer, noted that cardholder spending continues to accelerate. “Cardholders continue to be actively engaged and appear to be feeling better about their personal situations,” he said. “In addition, the on-boarding of new programs in 2011 contributed approximately 6% of the growth.”
Horn also cited a lowering in the cost of funds. “Our cash-funding rate for all card-related borrowings, which excludes noncash items, was 2.7% in Q1 2012, or 100 basis points better than last year,” he said.
Portfolio quality also is improving, Horn said. “Entering 2012, management expected approximately 60 to 70 basis points of improvement in principal charge-offs compared to the prior year,” he said. “Trends are now suggesting closer to a 100 to 120 basis-point improvement in 2012.
The unit recently signed a new, long-term agreement to provide private-label credit card services to Premier Designs, a leading direct sales and service company of high fashion jewelry (
Also during the quarter, Private Label signed long-term renewal agreements to continue providing private label credit card services with Little Switzerland Inc., a leading multichannel retailer of duty-free merchandise (
Average credit card receivables increased 7% compared with the first quarter last year, as customer payment rates stabilized on a year-over-year basis, Alliance Data said in its earnings release. Credit card receivables were $5.4 billion on March 31, up 12%, while the allowance for loan loss was $447.5 million, or 8.2% of ending credit card receivables. Delinquency rates improved to 4% of principal receivables, down from 4.9%, the company said.
Air Miles reward miles issued during the quarter totaled 1.23 billion, up 10.8% from 1.11 billion, while miles redeemed totaled 1.25 billion, up 26.4% from 988.6 million.
Air Miles Cash, the company’s new instant reward program launched late in the first quarter, already has about 350,000 collectors that have signed up for the program, which is being offered at only four sponsors–Shell, Metro, Jean Coutu and Rexall, Bryan Pearson, Alliance Data president, LoyaltyOne, said during the call.
“We plan to add six more sponsors to the program during 2012,” Pearson said. “Overall, the target of the instant reward program is high-frequency retail sponsors, primarily in the grocery, pharmacy, gas and home-improvement categories.”
LoyaltyOne unit revenue was up 18.4%, to $257.8 million from $217.7 million, while the company’s Epsilon unit earned revenue of $227.9 million, up 46.4% from $155.7 million.
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