American Express Manages Rising Expenses by Axing 4,000 Jobs

© AP Photo / Steven Senne, FileDespite being slightly better than analysts had expected, shareholders were not sufficiently convinced by the company's posted results.
Despite being slightly better than analysts had expected, shareholders were not sufficiently convinced by the company's posted results. - Sputnik International
Charge card firm reveals restructuring plan despite posting strong fourth quarter results.

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MOSCOW, January 22 (Sputnik) – Charge card provider American Express has plans to cut thousands of jobs in a restructuring move to reduce costs, a source told CNBC on Wednesday, adding that there will be 4,000 job losses overall, although the company will be hiring in some parts of the organization.

"More than 4,000 employees will be impacted by the restructuring," company spokeswoman Marina Hoffmann Norville confirmed to Reuters. "This will occur over the course of the year throughout the organization."

The disclosure comes after the release on Wednesday of the company's financial results for the fourth quarter of 2014, which included among its expenses a "restructuring charge of $313 million [$206 million after-tax]," to improve operating efficiencies, due partly to the redundancies. AmEx's consolidated expenses totaled $6.3 billion, up 3 percent from $6.1 billion a year ago.

The WSJ reported on Wednesday that the growth in expenses was causing some investors to take flight from the company's shares, commenting that while "AmEx of late has been falling short of its longtime revenue-growth target of 8%," the firm "has been able to meet earnings expectations, in part by controlling expenses." Wednesday's disclosure of an expenses upturn, however, led to a 2 percent fall in the value of the company's shares after hours on Wednesday, to $85.94. At 11.15 ET on Thursday the company's shares were down further, trading at $84.29 on the Nasdaq.

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Fourth quarter net income for AmEx announced on Wednesday was $1.4 billion, up 11 percent from $1.3 billion a year ago, while diluted earnings per share rose 15 percent to $1.39, from $1.21 a year ago. Consolidated total revenues net of interest expense increased to $9.1 billion from $8.5 billion a year ago, up 7 percent, a rise the company explained as due to the $719 million [$453 million after-tax] sale of the company's stake in Concur Technologies, as well as increased card member spending and higher net interest income.

"We’ve made very good progress against the backdrop of an uneven global economy and the negative impact of a strengthening U.S. dollar," declared chairman and CEO Kenneth I. Chenault in the company's statement. "We see many opportunities for growth, but at the same time, we face competitive and regulatory challenges." Lower spending on gasoline and weak December retail sales also contributed to a difficult environment for AmEx.

Despite being slightly better than analysts had expected, shareholders were not sufficiently convinced by the company's posted results. Investors "have grown increasingly demanding of the company’s results as the economy grows, consumers repair their balance sheets and more people switch from using cash or checks to plastic," commented the WSJ on Wednesday.

The laying off of 4,000 workers represents some 6 percent of the company's workforce, based on the figure of 62,800 employees stated in its 2013 annual report. The last round of job losses announced by the company was in January 2013, when 5,400 jobs were cut and $400 million [$287 million after-tax] paid in restructuring charges for the fourth quarter of 2012.

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