American Express has released its earnings. The company's strategy contains provisions for the laying off of more than 5000 staff in order to cut costs.
American Express Company (NYSE:AXP) has announced that it will lay off 5,400 of its staff. and has announced restructuring costs of $400 million for the fourth quarter of 2012. The news was delivered alongside the company’s earnings results for the last three months of 2012.
Earnings per share for the fourth quarter was $0.56 per share according to the American Express Company (NYSE:AXP) release. The firm had revenue of $8.1 billion, up 5 percent from the same period a year ago. Excluding the restructuring costs, and other charges, the company earned $1.09 in the quarter, that’s 8% higher than last year’s $1.01 per share.
Analysts had been anticipating earnings per share of around $1.12 excluding some items. the company earned $1.09 excluding items in the fourth quarter of 2012, matching its earnings in the third quarter of the year. Revenue was lower, having hit $8.4 billion in the third quarter of 2012.
The company said the layoffs were designed to reduce the company’s cost base going forward and to change the structure of the company in light of changes in the credit card industry. The firm estimated that staffing levels would be lowered by between 4 and 6 percent by the end of 2013. The company currently employs over 63,000 people.
The increase in users accessing and managing their credit cards over the internet has made it necessary to change the way the company handles their customer base. The most affected region of the business is the Global Business Travel sector. The company aid that segment of its business will be completely re-engineered in order to conform more closely to the behavior of its clients.
The company said that most of the $400 million in charges associated with the job cutting plan will be spent in severance pay to those taking redundancy. The job cuts will, according to American Express company (NYSE:AXP) be spread equally between positions in the US and international markets. The company said the lay offs will be concentrated in positions that did not directly generate revenue.
The company seems confident that its cost cutting workforce reductions will not have any detrimental effect on the services it offers. American Express Company (NYSE:AXP) said that the positions it is planning on getting rid of are, in many cases, duplicates. The lay offs will be a matter of increasing efficiency.
Traders seem to have been encouraged by the company’s announcement of lay offs. In after market trading, the firm’s stock has risen by more than 0.5% since the announcement was made less than an hour ago. American Express Company (NYSE:AXP) stock has risen by more than 7% since the start of 2013, in anticipation of this earnings announcement.
Though consensus estimates were not met by the company’s earnings announcement, the announcement of wide corporate restructuring has been enough for traders to put their money behind the company. The company will hold a conference call at 5pm EST to discuss its earnings, and its restructuring, with analysts and investors.
American Express Company (NYSE:AXP) will have to reassure investors that restructuring will go smoothly. If it manages that, its New Year rally may extend well into 2013.