Healthy growth in consumer credit card spending helped Alliance Data Systems Corp. on Feb. 2 to report significant increases in fourth-quarter revenue and net income.
Net income for the quarter ended Dec. 31 was $66 million, up 40.4% from $47 million during the same period in 2010. Revenue was up 12.2%, to $848 million from $756 million.
During a conference call with analysts to discuss the company’s fourth quarter earnings, Charles Horn, Alliance Data chief operating officer, cited receivables growth, cardholder spending, portfolio quality and funding costs as the main drivers behind the quarter’s growth in the company’s Private Label Services and Credit unit.
The unit generated $380.3 million in revenue, up 7.4% from $354.2 million a year earlier. Net finance charge income increased $31 million, or 9%, while transaction revenue decreased $4 million, or 19%, primarily because of lower merchant fees, the company said in its earnings release.
Credit card sales were up 13.6% as cardholder spending remained strong, to $3.01 billion from $2.65 billion, the Dallas-based company said. “Cardholders continue to be actively engaged and appear to be feeling better about their personal situations,” Horn said during the call.
The provision for loan-loss expense declined 12%, to $102 million, for the fourth quarter from a year earlier because of continued improvement in credit trends, the company said.
Average receivables for the quarter were $5.17 billion, up 3% from $5.02 billion as customer payment rates stabilized on a year-over-year basis, Alliance Data noted in its earnings news release.
The credit card delinquency rate improved to 4.4% of principal receivables on Dec. 31, down 100 basis points from 5.4% a year earlier. The principal charge-off rate was 6.3%, representing a 260 basis point improvement from 8.9% a year earlier.
“Our cash funding rate for all card-related borrowings, which excludes noncash items, was 3.3% in 2011, 30 basis points better than 2010,” Horn said during the call. “A similar improvement is expected for 2012.”
During the quarter, Private Label signed a long-term renewal agreement to continue providing private label credit card services for Express Inc. It also signed a new long-term agreement to provide private-label and cobranded credit card services for Christopher & Banks, Inc., a wholly owned subsidiary of Christopher & Banks Corp. (
Most recently, the company signed a new agreement to provide private-label services for Bon-Ton Stores Inc. “We plan to acquire their existing card portfolio, with closing expected in the first half of 2012,” Horn said in the news release.
Air Miles reward miles issued during the quarter totaled 1.39 billion, up 10.3% from 1.26 billion, because of growth in consumer card spending and increased promotional activity in the gas and grocery sectors, the company said.
“This large increase shows that both collectors and the sponsors remain highly engaged in the Air Miles program,” Horn said during the call. “It also drives immediate cash flow and positions us for strong revenue growth in 2012 and beyond.”
Miles redeemed totaled 958.5 million, down 12.9% from 1.1 billion, because of recent modification in the Air Miles Reward programs, according to the earnings release.
The new program option, Air Miles Cash, will enable collectors to instantly redeem their Air Miles reward miles in-store toward many everyday and high value purchases such as gas, grocery, drug store items and home improvement purchases at participating sponsors starting in March, according to the release.
In addition, effective at the end of last year, all existing and future Air Miles reward miles will have a date-stamp of five years.
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