American Express (AXP 0.01%) is one of the oldest companies in the country; it's celebrating its 150th anniversary this year. But you'd never know it from looking at its business. It's current, it's using technology throughout its business, and it's resonating with a young consumer base that should drive higher growth for decades.
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Young, affluent, and spending
One thing that hasn't changed about American Express is its target clientele of affluent consumers. These shoppers have more money to spend than the average shopper, and they're more resilient under pressure. It's an excellent business model for American Express, which takes annual fees for many of its credit cards and rewards spending with attractive perks. The fees pad the bottom line, and the model generates loyalty, as customers renew year after year.
Over the past few years, it has made a concerted effort to pivot to a younger generation of heavy spenders. It has refreshed its card assortment and rewards program to appeal to this consumer base, and they now make up its highest spenders. In the second quarter, U.S. consumer spending increased 7% over last year, but while Gen Z spending made up only 5% of the total, it increased 39% year over year. Millennials, who now represent 30% of the total, had the second-highest growth at 10%.
CEO Stephen Squeri noted that the premium base is growing, and American Express has developed a premium model over the past 40 years that's difficult to replicate, with exclusive offerings like its airport lounges and solid relationships with luxury partners. It has an edge with this expanding market, and as these customers continue to spend with American Express, it has a long growth runway.
It should also give investors confidence in the company's ability to change with the times and successfully shift its business to meet current trends.
