Spending is resilient, but it’s slowing.
American Express posted first-quarter earnings results that showed some puts and takes, where spending, especially among younger cohorts, was up double digits but represented a deceleration from growth rates logged in earlier periods.
The company’s earnings supplementals showed at least some caution for what lies ahead. Provisions for credit losses were $1.1 billion, as the company’s net reserve build was $320 million.
“[W]e’re mindful of the mixed signals in the external environment,” said CEO Stephen Squeri in a statement.
Billed business — which is a measure of member spending, including cash advances — slowed to a 16% growth rate in the quarter, as measured year over year, to $346 billion. That growth rate (year on year) had been as high as 35% in the first quarter of 2022. Total network volumes (which include billed business and processed transactions) showed that U.S. consumer volumes were up 16%. There were 3.4 million cards acquired in the quarter.
The company’s financial tables showed that spending on goods and services, which is 72% of worldwide billed business, slowed to 8%; that growth rate had been 19% a year ago. Travel and entertainment spending, which showed 37% growth, also slowed, from a 119% growth rate in the first quarter of last year.
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With a bit of granular insight into the demographics of the consumer base itself, the company noted that spending by millennials and Generation Z was up 28% in the first quarter — and that growth rate slowed from a recently reported 39%. More than 60% of consumer new accounts acquired globally came from millennial and Gen Z cohorts, Squeri said on the call.
Total loans and card member receivables grew by 19% in the first quarter to $172.4 billion.
The supplementals revealed that the card member loan net write-off rate was 1.5%, up from 1.1% in the fourth quarter and from 0.8% in the year-ago first quarter. The metric is still well below the 2.3% seen before the pandemic.
Squeri said during the conference call with analysts that spending on T&E “offset some softness and small business spending.” Small business spending slowed to 6% growth and had been 8% previously, as measured in the fourth quarter. He noted, too, that spending at restaurants “continues to be a bright spot with growth accelerating to 28% on an FX-adjusted basis year over year.” Reservations booked on the company’s Resy platform reached a record in March, with 40 million users globally, representing a 5-million-member boost in the last six months.
“Our customers have been resilient thus far in the face of slower, slower growth and [a] higher inflation economic environment,” Squeri said on the call. “While the near-term economic outlook is mixed, our customers’ spending and credit performance to date along with the continued strong demand for our products from high-quality new customers reinforces our confidence in our ability to achieve our long-term aspirations.”
Chief Financial Officer Jeff Campbell said in his remarks on the call that spending in T&E should moderate going forward, coming off elevated rates as economies reopened in the wake of the pandemic. International T&E growth was “especially robust,” he said, at 58% in the quarter.
“We continue to expect delinquency and write-off rates to increase over time, but they are likely to remain below pre-pandemic levels in 2023,” said Campbell.
Asked about spending from younger consumers, Squeri said: “Millennials have been a big part of our growth story, and if you go back pre-pandemic, they represented about 20% of our billings. Now they represent 30% of our billings… This gives me a lot of confidence as we move forward, that we’re making the right moves from a value proposition perspective and continuing to invest in the right benefits, and we are acquiring the right customers.”
