January 10, 2012
American Express just announced that it is cutting 5400 jobs.
Cuts will be made across seniority levels, but the travel sector will get hit the hardest.
The company itself will take a $287 million hit related to the layoffs.
Here's the press release from the company:
American Express Reports Strong Cardmember Volumes and Revenues for Fourth Quarter; Will Recognize Charges for Restructuring, Membership Rewards and Cardmember ReimbursementsNEW YORK, January 10, 2013 --
American Express Company (NYSE: AXP) said today that cardmember spending, revenue growth and credit quality remained strong during the fourth quarter despite an uneven economy.
Net income for the quarter, however, reflects costs associated with three items:
- A $400 million restructuring charge ($287 million after-tax) designed to contain future operating expenses, adapt parts of the business as more customers transact online or through mobile channels, and provide the resources for additional growth initiatives in the U.S. and internationally.
- A $342 million expense ($212 million after-tax) reflecting enhancements to the process that estimates future redemptions of Membership Rewards points by U.S. cardmembers.
- Approximately $153 million ($95 million after-tax) of cardmember reimbursements for various types of transactions dating back several years. This amount deals with fees, interest and bonus rewards as well as an incremental expense related to the consent orders entered into with regulators last October.
Fourth Quarter ResultsAfter reflecting the impact of these items, net income for the quarter was $637 million, or $0.56 per share.
Excluding these items, fourth quarter adjusted net income was $1.2 billion, or $1.09 per share. For the year ago period, net income was $1.2 billion, or $1.01 per share. Fourth quarter consolidated total revenues net of interest expense were $8.1 billion, up 5 percent from $7.7 billion a year ago.
Cardmember spending was 8 percent higher than a year ago, despite a brief dip in late October/early November reflecting the impact of Hurricane Sandy on consumers and businesses in the northeastern United States.
Credit indicators remained at historically low levels. The write-off rate for the U.S. lending portfolio (principal only) was 2.0 percent for the quarter.
Fourth quarter and full year 2012 results will be released as scheduled on January 17, 2013.
“We’ve delivered strong results since coming out of the recession and have been consistently gaining share in a very competitive U.S. industry,” said Kenneth I. Chenault, chairman and chief executive officer. “In addition to strengthening our ties to merchants and cardmembers, we have launched products for new customer segments, expanded into new geographies internationally, and extended our presence well beyond the traditional American Express footprint.
“All of this has been taking place at a time when technology is transforming the world of commerce, regulatory changes are reshaping the financial industry, and customer loyalty has become more important than ever.
“Maintaining our momentum in this environment will require us to evolve our business, embrace new technologies, become more efficient and generate resources to invest in the many growth opportunities we’ve identified.
“Regardless of the environment, success is also going to be defined by doing what’s right for our customers. We never want to make mistakes, but we are fully committed to correcting them and providing compensation when appropriate. At a time when public confidence in financial institutions is at a low point, we want to make sure that we live up to the reputation we’ve earned over many years for delivering superior value and service to our customers. The material costs for reimbursement that we are able to identify have been recognized, but we are going to continue to work closely with regulators and strengthen our controls as part of our personal commitment to protecting the integrity of the American Express brand.”
RestructuringThe restructuring charge mentioned above will consist largely of severance payments related to the elimination of an estimated 5,400 jobs. Those reductions will be partly offset by jobs the company expects to add during the year. Overall staffing levels by year end 2013 are expected to be 4 to 6 percent less than the current total of 63,500.
Elements of the restructuring program include:
- Reengineering the business model in Global Business Travel to reduce its cost structure and invest in capabilities that better align it with the shift of customer volumes to online channels and automated servicing tools;
- Continuing the reconfiguration of cardmember servicing and collections as we drive efficiency through our global scale and as more customers use online and mobile channels instead of paper and telephone;
- Reducing the size of our staff groups while continuing to maintain the right focus and resources on risk and control activities;
- Ensuring that we have the right organizational structure across our client management and sales functions to best serve our customers; and
- Consolidating similar functions and eliminating duplicate efforts wherever possible in order to drive efficiency.
The job reductions will take place across seniority levels, businesses and staff groups. The largest reductions will come in the travel businesses, which operate in an industry that is being fundamentally reinvented as a result of the digital revolution. Overall, reductions will be spread proportionally between the U.S. and international markets and will primarily involve positions that do not directly generate revenue.
Changes within the customer service organization are designed to help us continue to deliver award-winning service and operate at maximum efficiency as more customers and merchants do business with us through online and mobile alternatives.
“Against the backdrop of an uneven economic recovery, these restructuring initiatives are designed to make American Express more nimble, more efficient and more effective in using our resources to drive growth,” said Mr. Chenault. “For the next two years, our aim is to hold annual operating expense increases to less than 3 percent. The overall restructuring program will put us in a better position as we seek to deliver strong results for shareholders and to maintain marketing and promotion investments at about 9 percent of revenues.”
Membership Rewards EstimatesMembership Rewards, the industry’s largest and most successful customer loyalty program, allows cardmembers to accumulate points each month and redeem them at a future date by choosing offers from hundreds of our merchant partners.
Determining the costs for this program is a multi-step process that uses predictive models to estimate the amount of earned points that will ultimately be redeemed by cardmembers, and then applies an estimated average cost per point that the company will incur for those redemptions.
Following a previously announced review, the company enhanced the ultimate redemption rate (URR) estimation process, refining the predictive model it uses for the U.S. program. These changes increased the global URR assumption to 94 percent from 93 percent and translated to an additional $342 million in the balance sheet reserve for Membership Rewards and a corresponding charge in the fourth quarter.
“Loyalty and reward programs are one of our major competitive advantages,” said Mr. Chenault. “They have been a centerpiece of our marketing efforts and based on their success we have expanded them during the last few years to offer broader opportunities for cardmembers to earn and redeem points. The enhancements we’ve made to our models predict even greater usage of the program in the future and that has traditionally meant closer, more meaningful relationships with our cardmembers.”
Cardmember ReimbursementsAs previously reported the company has been cooperating with ongoing regulatory reviews and continues to enhance its compliance controls.
The company’s analyses of cardmember inquiries, complaints and account records from the last several years have identified instances where:
- Late fees of approximately $28 million were collected from some cardmembers who did not receive statements for the billing period prior to the write-off of their accounts.
- Interest of approximately $24 million was charged to some cardmembers who had disputed balances on their accounts.
- Certain bonus rewards for industry specific spending with an aggregate value of $68 million should have been credited to cardmembers.
Separately, the company identified additional cardmembers during the quarter who will receive restitution as part of the consent orders we entered into with various U.S. banking regulators in October. That restitution, which amounts to an incremental $33 million, relates to previously disclosed issues with debt collection settlement letters.
Impacted cardmembers will be notified directly in the coming months.
American Express will hold a conference call for investors to discuss this announcement at 5:00 p.m. (ET) today. A live audio webcast of the investor conference call will be available to the general public on the American Express Investor Relations web site at http://ir.americanexpress.com. A replay of the investor conference call will be available after the call at the same web site address.
These results represent preliminary estimates for the three months ended December 31, 2012.
Read more: http://www.businessinsider.com/american-express-is-axing-5400-jobs-2013-1#ixzz2HhnLppCh