The dark cloud that was the lost Costco card portfolio didn't garner a mention during the American Express 2017 fourth-quarter earnings call Thursday — the first time in many quarters that this was the case.
Instead, Amex Chief Financial Officer Jeff Campbell was more than happy to discuss "Platinum," the premier card in the Amex portfolio. In many ways, Amex has put the Costco loss in the rear-view mirror, absorbing at least some of that blow in taking over the full
To be sure, Amex still has some obstacles to overcome after reporting a net loss of $1.2 million for the quarter because of implications of the new tax bill, and some overriding
The company had revealed this month that it expected the new tax law to result in a reduction of fourth-quarter earnings
The tax law creates a 15.5% rate hike on the company's overseas income held as cash, while non-cash holdings would be taxed at 8%. Previously, those types of earnings were deferred until they were brought back to the U.S. from abroad.
But revenue at Amex is humming along at $8.8 billion for the quarter, up from $8 billion a year earlier, fueled in part by a strong U.S. economy as well as the success of the card brand's two-year plan to cut operating costs through lower headcount, negotiating better deals with vendors and establishing new practices and policies.
But a big part of that enthusiasm has to do with cardholder acceptance of higher fees for higher rewards with the Amex Platinum card and overall cardholder spending, which Amex cited as the engine behind its 10% increase in quarterly revenues.
"When you think about our fourth quarter, it was the highest revenue growth we have seen in quite some time, and the fourth quarter is when we already began to lap the Platinum changes," Campbell said, referring to the time frame in which Amex reaped the benefits of its Platinum card promotions.
"Over the last four quarters, we were seeing rewards [[costs] growing faster than billing because of the Platinum changes, but this past quarter it came back to a more normal level, where the rewards were more consistent with billing," Campbell added.
Amex has worked on positioning the Platinum card at top of market since 2016, bringing in music giant
But in the past year, Amex turned the Platinum card into a
It also boosted points earnings at five points per dollar on airline tickets and at hotels booked through American Express Travel. And, while the fee for the Platinum card rose to $550 a year from $450, Amex eliminated the fees for up to five Gold cards when added to an account.
Ultimately, cardholders did the math and determined the new perks were worth the higher annual fee.
"The fact that you continue to see strong performance in Platinum and the fact you did not see any drop-off in revenue growth, we feel really good about that," Campbell said.
Despite all the competition with other elite cards, Amex ended 2017 with record numbers of Platinum cardholders, Campbell added, though he did not disclose cardholder figures.
"It's a tremendously strong confirmation of the differentiated value proposition we offer," Campbell said. "It is the value of some of the experiential benefits, and the fact that we have the courage, because we believe in them, to price for those benefits and that value proposition."
As a result, he added, Amex goes into 2018 "with a lot of great momentum with the Platinum product."
Still, the company has a few challenges this year that may or may not affect the bottom line.
Amex faces a
The company also has to determine the fate of its
