American Express Company (AXP) Resorts to Massive Cost Cutting

Surprise marked the trading session on Wednesday, 21st January, 2015, when the fourth-quarter earnings declared by American Express Company (NYSE:AXP) extended beyond what had been expected and projected by analysts. Figures posted by the company quoted an EPS of $1.39 as against $1.38 expected by analysts and $9.11 billion in revenue as opposed to $8.53 billion. On being released, these figures caused the share value of the stock to rise and reflected positively on the company’s performance vis-à-vis the same duration last year.

Kenneth I. Chenault, CEO of American Express Company (NYSE:AXP) attributed the increase to a number of factors, all of which have been mentioned in his following statement –

“Solid results this quarter reflected the underlying themes that have characterized our performance throughout 2014: higher Card Member spending, increased loan balances, tight control of operating expenses and a substantial return of capital to shareholders through share repurchases.”

american express AXP logo

When Mary Thompson covered the same on CNBC, Concur Technologies was quoted as another factor which might have played a significant role in boosting the company’s earnings. As per a press release issued by American Express Company (NYSE:AXP), it had gained revenue to the tune of $719 million by disposing off its investment in the online travel agency.

That said, the joy was short-lived as the company announced that it would be laying off as many as 4000 employees during the forthcoming months. Explaining the decision as the need to restructure and simplify the complexities, CEO Kenneth Chenault justified –

“You have to have this spirit of reinvention, and that is what we have in the DNA of the company. If you don’t innovate, you die. You have to constantly innovate, you have to constantly challenge the status quo.”

He went on to say that for facing the challenges that lay ahead in terms of regulatory laws and competition, cost cutting is the need of the hour and this is why thousands of employees are going to be laid from work. In response to this news, the American Express Company (NYSE:AXP) stock lost its previously gained momentum and plunged by 2%.

This article has been written by Vinita Basu.

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