Amex: Card Spending by Gen Z and Millennials Surges 21%

For American Express, the momentum lies with younger consumers.

Results posted by the company on Friday (July 21) show that younger generations’ spending surged double digits, as demand for goods and services continued to be strong.

Earnings materials from the company show that consumer billed business — which is a measure of member spending, including cash advances — was up 10% to $155 billion. The company noted in its earnings release that card spending, overall, has hit another all-time high. Travel and entertainment related spending was up 14% on an FX-adjusted basis.

Drilling down into the demographics, management noted in the materials and in commentary on the conference call with analysts that more than 60% of new consumer accounts were tied to millennials and Generation Z consumers, who boosted their spending by 21% overall, as measured year over year.

During the conference call with analysts, CEO Steve Squeri noted 70% of accounts were acquired on fee-based products, noting that “our fee-based premium products, which drive our spend centric economics and produce a fast growing stream of subscription like revenue spending is the largest contributor of revenues. While lending plays a more modest role in our model, this revenue mix is a key differentiator for us.”

And in a nod to the snapback in spending, Squeri added that the second quarter was a record quarter for restaurant reservations for Amex through its Resy platform.

CFO Jeffery Campbell said that spending on goods and services was up 6% overall. Spending by U.S. small to mid-sized enterprises slowed during the quarter (logging 2% growth), but management said on the call that this segment is but a small, mid-single digit percentage of the overall card business.

Looking ahead, Campbell that that spending on travel and dining by consumers should be up by double-digit percentages through the rest of the year — and travel bookings are now above pre-pandemic levels. Spending from international consumers grew 16%.

And in discussing credit quality, management noted that only 8% of U.S. card member loans and receivables come from customers with a FICO score of lower than 660. While delinquency and write-off rates are likely to increase over time, the firm said they will remain below pre-pandemic levels in 2023. Reserves of $4.7 billion were 2.6% of total loans in card member receivables. Net write-off rates of 1.8% in the most recent quarter are up from 0.8% a year ago, but still below the 0.8% of last year — and the end of 2019 had logged a 2.2% measure. It may be the case that the increasing reserves and expectations for future write-offs helped send the shares lower 4% during intraday trading.

But management’s overall tone remained sanguine on the call. “As the economy gets better,” Squeri told analysts, “we expect spending to pick up — and we feel really confident.”