AXP
#Well, all fair questions, <UNK>.
We went into 2015, as we began the year in January, with an assumption that we would be continuing our very long-term partnership with Costco.
We set marketing plans and we set budgets, and we set the management teams off to execute on that plan.
When we changed that plan in February and decided to go down a different path and concluded that we think in the long run, we can generate more value for our shareholders with the path we've now gone down, we really had to do a little bit of a reset.
We managed the Company for the long term.
We want to be thoughtful when we choose to do something as dramatic as we've done, go to our shareholders and say we're going to ramp up spending this year and it's going to result in not a lot of earnings growth.
And in fact, EPS could even be down a little bit this year.
We want to be really thoughtful about the way we deploy those resources.
And so, while we began to deploy them in the second quarter to be as thoughtful as we wanted to be, reality is it's taking us until the third quarter to get fully ramped up.
So we think that's the right way to run the Company, the right results, and as we said beginning back in February, we're stepping away a little bit from overly focusing on each individual quarter.
Well, look, the rewards environment in general has always been competitive, and it's pretty competitive right now.
What we really try to focus on, <UNK>, are a couple of things.
Number one, ultimately this is about broad customer value proposition; rewards is one component of that.
We have a brand.
We have a reputation for security and trust and service.
We try to leverage those things.
Second, we have a very broad portfolio of products in the US, and we do that because we think there's tremendous value in making sure you're delivering to different customer segments the things they value the most.
Whether it be cash-back rewards products; things that use our membership rewards program, which is of course still by far the largest and most diversified rewards program; or our many co-brand products.
By focusing on the broader customer value proposition, by making sure we're being really thoughtful about how we segment the different customer groups and produce something that they're going to most highly value, we think we can get to the best possible result both for both our card members and our shareholders without having to compete dollar for dollar on every single aspect of every single product.
So we feel good about some of the latest things we've launched.
And certainly the big launch in the last 12 months was around the EveryDay Card last year.
That card has performed better than we had anticipated.
It has reached a little bit different demographic, which is exactly what we were trying to do.
So we're pretty pleased with that.
So very good question, <UNK>.
So two things.
There was a sequential decline here Q1 to Q2 from 4% to 2%.
That decline, actually, relates to one product with actually maybe one large customer.
It's an airline fuel-buying product, very, very low-margin product.
As an old airline CFO, I'd point out the airlines are a little flush with cash right now, and so they're minimizing their use of these products, which help them out with cash flow.
That's what caused the drop from 4% to 2% as you go from Q2 to Q1.
Now, 4% is still a low number, and as I said last quarter, boy, as we have really scrubbed our customer base, all I can tell you is it is US-driven, not international markets.
It is very broadly spread in terms of a slowdown in just the organic growth spending trends amongst mid-size and larger clients.
It's TV-oriented and seems to be a very broad spread.
So you can draw different conclusion from that.
Is this companies tightening TV budgets as they think about the economic environment.
Is it a little bit of peer pressure on the airlines.
We have lots of different theories, and you can add your own.
But those are the facts as we see them.
We're always very cautious, <UNK>, about reading too much into trends that occur over a couple of weeks.
So I would say, no, we'll just have to see how Q3 plays out.
Well, of course, <UNK>, it's very, very early days here.
We have just announced the product.
It's available with a small number of initial websites, with a longer public list of people who will soon be adding it.
Certainly we have done some pilot sites before we launched it.
And, of course, the key here that everyone is trying to get to with these products is you're trying to get to a much higher percentage of people who go all the way through to the end and buy what they've been looking at in any particular online or mobile experience.
And I would say we, and the couple of merchants we had doing pilots with us, were very encouraged by the results that we achieved in terms of improving those rates of getting people through to the final step.
So when you think about the economic arrangements, obviously can't comment on specific economic arrangements, but what this is really about and the real pot of gold that everyone is chasing here is can you get those rates up significantly.
And to the extent you can prove that you can, then the economics take care of themselves for everyone.
And that's what we're seeking here.
Now, I will go back to where I started.
It's very early days.
We're going to have to see how things progress here, but we are encouraged by the early results.
We think we have a product with some very interesting features relative to some of the other alternatives.
It is very simple.
It is very quick, but we'll have to give you an update as time goes on.
So let me take those one at a time.
So start with the DOJ, so you are correct.
The judge's order became effective at the beginning of this week, and we are in the process of following that order.
One part of that process is notifying all of our merchants of their right to steer, and that will be happening per the order in the next several weeks.
There's other aspects to it, but that's certainly one of the most important parts.
As we think about the order, I think the first thing I would is when ---+ as we sit here and think about it today, we believe that in the near term, the financial impact of this order is within the financial outlook that we provided at investor day, reiterated it again today.
Clearly, in the longer term, we're going to have to see how the marketplace reacts to the order and think about what impact that's going to have on our business model.
So that's where we are with the DOJ.
Much more straightforward question, yes, we took a restructuring charge last year that involved about 4,000 employees.
We are well into that; however, there's a significant portion still to come.
Some of this involves fairly complex moves as we right shore Interestingly enough a lot of this is moving from one non-US location to another non-US location in some of our operations.
That has to be done very thoughtfully, and so there's a very experienced team at doing this who is involved in that process, but they won't be done until much closer to the end of this year.
Two good questions.
So on FX, essentially what it built into our multi-year financial outlook, to use broad strokes, is roughly the rates you see today.
So to the extent ---+ because it is hard to imagine, these may be famous last words, that you could have another move as dramatic as you have had in the last 12 months beyond where we are today.
If you do, that will be a tough head wind for us that we'll do our best to manage.
I'd just remind you that the movement of the US dollar so far, so fast against so many currencies all at once, as it's done in the last nine months, you have to go back quite a number of decades to find another move like that.
So it could happen, but we'll have to see.
On credit, you're correct, we built in both in the back half of this year as well as into the 2016 and 2017 outlook some modest uptick and steady uptick in the provision and growth of the loan provision, because clearly we have a very steady track record now in growing our loans above the industry average.
What happens if that is more benign.
Well, that will be a very good thing.
What I would say in terms of the bottom line is what we are trying to be true to at this point is the financial outlook that we provided to people and making sure we're really well positioned to demonstrate and to execute upon once we've lapped all the FX, once we've lapped all the co-brand changes, once we've lapped Costco in the US, demonstrating to people that the business model and financial model that have produced 12% to 15% EPS growth rates is in place and is working well.
And so, if credit is a little bit more benign, we will frankly look to see whether we are operating within the financial outlook that we have and whether we have other growth initiative funding that we, in fact, think it could be for our shareholders very profitably redeployed, or whether we want to take it to the bottom line to make sure we feel comfortable that we can come in with the outlook we've provided.
There's always a lot of moving pieces.
We'll have to see where they all come out.
But hopefully, <UNK>, that gives you at least some sense of how we will think about things.
Well, <UNK>, I've got to say, this is the one where I hope you're right, and I hope that's a signal, but all I can do is tell you is what we are seeing in our corporate business.
And I'd remind you, it is a ---+ while we do lots of things in the GCP segment, the biggest component is still tied to, more or less, T&E-oriented spend by mid- to large-size companies.
So I have read some of those same comments that you just referenced.
I will have to see whether they show up in our results over time.
Certainly through June 30th, it would be hard to see that.
