As the novel coronavirus continues to wend its way through communities across the globe and economies remain shut down, many companies are seeing a larger than anticipated shock to their businesses. One of them is American Express (AXP -0.84%), which reported lower-than-expected first-quarter revenue and earnings Friday due to the coronavirus fallout.
In the company's update to shareholders in March, it anticipated a 2% to 4% revenue increase due to COVID-19 after 10 quarters with revenue growth of 8% or higher. Actual revenue for the first quarter came in at $10.3 billion, a 1% decrease. Earnings were $367 million, or $0.41 per share, compared with $1.80 per share for the first quarter of 2019. Adjusted earnings were $1.98, which takes into account $1.7 billion of credit reserve builds.
CEO Stephen Squeri acknowledged the change. "The first two months of 2020 continued the strong momentum we have delivered over the past two years, but we're now in a different world," he said.
The company is aggressively reducing costs and adding cash reserves since it sees high uncertainty going forward. Squeri committed to paying and supporting employees through the duration of 2020 as well as offering financial assistance programs for small- and medium-business cardholders. This week, American Express launched Stand for Small, a coalition of 40 companies that will offer assistance to U.S. small businesses.
The revenue decline came from soft spending volume at the end of the quarter after a strong start in January and February.
Consolidated provisions for losses were $2.6 billion due to the inflow of $1.7 billion. American Express considers itself in a strong financial position from which to operate in the second quarter.