Business: Costco Ends Contract with AmEx

Costco Wholesale Corp will stop accepting American Express Co’s credit cards at U.S. stores from next year, which threatens about 8 percent of the worldwide annual spending on its cards. AmEx said that the loss of the contract would hurt the company’s earnings for the next 2 years, sending its shares down to 7 percent and wiping out $6 billion of market value. A JPMorgan Securities analyst said that the loss of Costco would reduce AmEx card spending by about $80 billion a year. The company is planning to invest aggressively to prepare for the termination of the contract and it is expecting earnings per share growth in 2015 to be flat to down compared to 2014.  The agreement is set to end after 16 years in March 2016. However, American Express did renew contacts with Delta Airlines Inc., Starwood Hotels and Resorts Worldwide Inc., and Cathay Pacific Airways Ltd in 2014.

Contributor: Chelsea Edirisuriya

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