Amex morale plummets after Costco split

Wholesale retailer Costco has announced that it will stop accepting American Express credit cards from next year in the US, a move which sent the card issuing company’s shares plummeting by 7 per cent.

The loss of the contract with Costco will hurt Amex’s earnings for the next two years, Reuters reported on Thursday, threatening 8 per cent of the worldwide annual spending on the company’s cards. The split is expected to reduce spending on Amex cards by $80 billion a year, a figure which includes an assumed reduction in use at stores other than Costco.

The agreement between the two companies will end at the end of March next year, after 16 years where Costco only accepted Amex cards at its US warehouses.

Costco dropped Amex in Canada last year, inking a partnership with Capital One and MasterCard Inc, which has raised speculation that these companies will also replace American Express in the US.

AmEx shares were down 6.1 percent at $80.75 in afternoon trading on the New York Stock Exchange. The company said it is planning some aggressive investment ahead of the termination of the contract, which means earnings per share growth in 2015 will likely be flat to down compared to 2014.

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