American Express Company (NYSE:AXP) Q1 2023 Earnings Call Transcript

The next question is coming from Mihir Bhatia, Bank of America. Please go ahead.Mihir Bhatia Hi thank you for taking my questions. I was curious, if you could elaborate a little bit more on the slowdown that you’ve seen, I think you mentioned in the U.S. a bit. Are there particular types of spending you’re seeing? Is it broad-based across customers? And I think you mentioned both on the consumer and small business side. So if you could just elaborate on that. And if you have any data on April you can share.Steve Squeri Well, on the consumer side, just look at sequentially, consumer in the fourth quarter grew 15%. We’re growing 16%. So there was really no slowdown there. When you look at U.S. SME, we grew 8%, and we’re growing 6% now.

So, I think there was a little bit of a slowdown in U.S. SME. And remember, when you look at our consumer business, our consumer business, I don’t believe is really representative of the entire economy.Our consumer business is representative of a really high-end premium consumer base. Our small business, because of the volumes that we have, are probably a little bit more representative. And where you are – where you do see a slowdown in small business is Goods and Services. What I’ll remind people is small businesses are small businesses, because they’re small. And what happens is to a level of spending, and then unless you – unless that business is really going to grow, you can only spend for what you’re taking in.But I think what we’ve seen, and this is a continuing trend is, you’ve seen a slowdown in a lot of the advertising spending.

But I will point out that, that’s not any different than what you’ve seen in – from a lot of corporations, I mean – and ours ourselves. I mean, if you look at it, our plan has been to spend the same amount of marketing that we spent last year this year, and that number is $5.5 billion. And when you look at that number, we try and get more and more efficient with that and we push our partners to become more and more efficient as well. And so you get to a point of scale where you just don’t spend anymore. And I think we’re seeing a little of that in small business as well.But look, 6% growth in the U.S. small business with the amount of volume that we have, right now we’re okay with that and it’s in line with us making our overall plan.

What I would point out from a small business perspective is international is not like that. International is growing much, much faster than that, and international is back to our fastest growing segments. So, we’ll keep watching it, but really happy with the consumer. And right now, I think small business is kind of in line with where we have it going for the rest of our plan for the rest of the year.Operator Thank you. The next question is coming from Mark DeVries of Barclays. Please go ahead.Mark DeVries Yes, thanks. Just wanted to get into what drove the acceleration of growth in International Card Services. Jeff, I heard you alluded to the fact of seeing results from the reorg. But could you talk a little bit more specifically about kind of what you did in that business segment to really drive the improvement?Steve Squeri Well, I think – so there’s a couple of things, right?

Number one, there was – no place in the world is more impacted by the pandemic than International. And when you look at our card base internationally, it is a really high T&E-orientated card base. And correct me if I’m wrong, I think this is a 59% T&E increase in our international part.So that’s number one. I mean, I think you just have – you have just some built-up demand that had been pushed down, number one. Number two, we continue to improve our merchant coverage tremendously in international. So there are more and more places to use the card. And I think coverage cannot be understated or overlooked in how it drives growth, especially in international. And I think that’s really important. I think we continue to acquire new card members in international as well.And as far as the reorganization, what the reorganization does for us is it makes us a lot more efficient.

And so let me give you an example. Sometimes it’s really hard to determine whether a potential customer is a small business or whether a potential customer is a consumer. And what you do is you put resources in, you go against – you attack them both ways. Well, now what we’re doing is, we’re looking at that in a more holistic way. And so instead of having what I like to refer to as the Noah’s Ark syndrome of two of everything, we now have someone in a market focused on card acquisition, both small business, consumer and international and large market and corporate as well.And so I think what we’ve done is, we’ve been able to become more efficient with our marketing. We’ve been able to share intellectual property across business lines.