NEW YORK — American Express profits rose sharply in the third quarter as it transitioned the vast majority of its members to a new, higher-fee Platinum Card while its well-to-do customers continued to spend aggressively.
The company also announced its first major job cuts in roughly a decade, telling investors it plans to cut its workforce by 5%, or about 3,500 employees.
The New York company reported a profit of $3.71 billion, up 28% from a year ago, or $5.42 a share. Excluding a one-time gain from AmEx's sale of its stake in Global Business Travel Group, the company earned a quarterly per—share profit of $4.68. That figure beat Wall Street estimates.
AmEx's revenue and profits rose as customers both charged more on their cards and paid more to hold an AmEx card.
Last year, AmEx updated its Platinum Card, adding several new perks for cardmembers while raising the annual fee from $695 to $895. Reviews of the update were generally positive at the time.
However, the biggest question for Wall Street was whether AmEx cardmembers, even given the company's wealthier customer base, would stomach a $200 price increase.
So far, AmEx says that nearly all of the customers who have been moved to the higher fee Platinum Card have decided to keep it. Net card fees, which include the annual fees on cards like Platinum, rose by more than $400 million from a year earlier.
The company also continues to see increases in spending on its cards. The average AmEx customer spent $6,735 on their cards last quarter, or $2,245 a month. That's up 5% from a year earlier.
Some of that higher spending is likely tied to inflation, said Chief Financial Officer Christophe Le Caillec in an interview.
Le Caillec pointed to the the fact the company saw a 10% increase in travel and entertainment spending, compared to a year earlier. A portion of that growth was a 13% in dollars spent on airline tickets. Airlines tickets have risen this year, due to higher fuel costs and other inflationary pressure.
But the growth in spend is also because cardmembers are simply using their cards more, with the number of transactions per cardmember rising.
AmEx CEO Steve Squeri told investors that layoffs were about making the company more efficient, not a reflection of any downturn in business. One concern among investors had been AmEx's rising operating costs, as the company has had to compete with other credit card companies, including Capital One and JPMorgan Chase on perks and rewards that are costly to manage.
The company now forecasts it will earn an adjusted profit of between $17.60 and $17.90 per share for the full year, raising the lower end of its previous forecast of $17.30 to $17.90 per share.