With the nation hunkering down to slow the spread of Covid-19, American Express Co. said Tuesday it expects its first-quarter revenues, adjusted for currency fluctuations, to grow only 2% to 4% year-over-year. In contrast, AmEx’s revenues net of interest expense rose 7% to $10.4 billion in 2019’s first quarter.
In an early-morning conference call with analysts, AmEx chairman and chief executive officer Stephen J. Squeri and chief financial officer Jeffrey C. Campbell said travel-and-entertainment spending on AmEx cards has fallen sharply in recent weeks, though they didn’t give numbers. The fall-off is no surprise given the spread of Covid-19, the so-called coronavirus, this winter from China, where it originated, to Europe and now the United States.
State and local authorities nationwide have ordered schools, restaurants, and other pubic venues to close and urged people to stay home. As a result, airlines have drastically cut flights, conferences have been postponed or canceled—including several in the payments industry—and entertainment venues ranging from the Las Vegas Strip to Walt Disney World have closed.
AmEx first saw spending weakness in Asia, which generates only 9% of AmEx’s revenues compared with 76% for the United States. “At the beginning of March, we said we were starting to see a bit of softness in T&E volumes outside of Asia,” said Campbell, reviewing data through last Friday. “Since then, we’ve seen that softness accelerate dramatically.”
Both Squeri and Campbell noted, however, that some non-T&E spending has been strong, particularly in e-commerce and at grocery stores and big-box retailers such as Walmart and Target. Media reports everywhere have shown how consumers have stripped store shelves clean of toilet paper, hand sanitizer, and certain food items.
AmEx, most of whose employees are now working from home, won’t make predictions beyond the first quarter. “The trends have not yet stabilized and continue to decline,” said Campbell.
Although AmEx built its business on T&E spending, the company has diversified its merchant base in recent years. In 2019 the company generated 71% of its proprietary billings from non-T&E merchants, according to an investor presentation.
Still, T&E remains highly important for AmEx. Its cobranded card for Delta Airlines accounted for 8% of billings last year, and its other cobranded cards for British Airways and the Hilton and Marriott hotel chains generated 2% each.
Squeri said AmEx bounced back strongly after the retrenchments caused by the 9-11 terrorist attacks and the 2008-09 financial crisis, and he expects the company will do so again. But he wouldn’t predict when, saying spending is still heading down a trough. “What we don’t know, though, is how low that trough does actually go at this point,” he said.