Costco to ditch American Express cards at U.S. stores next year

(Reuters) - Warehouse club retailer Costco Wholesale Corp will stop accepting American Express Co's credit cards at U.S. stores from NEXT (NXT.LO)year, threatening nearly 8 percent of the card company's worldwide billed business.

AmEx, which had worldwide billed business of about $1 trillion in 2014, said the loss of the contract would hurt earnings for the next two years. The company's shares fell as much 7 percent in early trading on Thursday.

"...This represents a large loss in our opinion," Jefferies analysts said in a report, noting that Costco also accounts for 20 percent of AmEx's worldwide loans and 10 percent of cards in force.

Costco declined to comment on the move, which follows its decision to drop AmEx in Canada last year.

Capital One Financial Corp replaced AmEx as its card partner in Canada, raising speculation that the company could also replace AmEx in the United States.

Capital One, whose shares were up 2.3 percent, did not immediately respond to a request for comment.

Competition in the co-branded card business has intensified in recent years, leading to higher renewal costs, American Express CEO Kenneth Chenault said on a conference call.

The exclusive agreement between AmEx and Costco is set to end after 16 years on March 31 next year.

Costco has 468 warehouses in the United States and Puerto Rico, catering to relatively higher-income customers than Wal-Mart Stores Inc and Target Corp .

The company, which sells everything from jewelry to fresh produce at its cavernous members-only stores, reported revenue of $112.64 billion for its fiscal year ended Aug. 31, 2014.

AmEx shares were down 6 percent at $80.75 in late morning trading on the New York Stock Exchange.

(Reporting by Avik Das in Bengaluru; Editing by Savio D'Souza and Sriraj Kalluvila)

WhatsAppFacebookTwitterLinkedinBeloudBluesky