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American Express cuts jobs
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December 12, 2001: 4:53 p.m. ET
Firm slashing up to 6,500 in travel unit due to effects of Sept. 11 attacks.
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NEW YORK (CNN/Money) - American Express Co. said Wednesday it would slash up to 6,500 jobs in its travel unit due to a sharp drop in tourism since the Sept. 11 terrorist attacks and cut its forecasts for fourth-quarter earnings.
Shares of American Express (AXP: down $0.84 to $33.42, Research, Estimates), a Dow component, finished off about 2.5 percent on the news, helping depress the Dow Jones industrial average.
Amex now expects to report a fourth-quarter profit of 34 to 36 cents a share excluding restructuring charges. Analysts polled by earnings tracker First Call had expected a profit of 40 cents a share.
The New York-based company derives 60 to 70 percent of its revenue from travelers checks and travel services, but its credit card business also suffered with the ensuing consumer spending slowdown.
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CNNfn's Amanda Lang reports on Amex's job cuts and fourth-quarter earnings.
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Meanwhile, the company also is struggling to manage costs after its headquarters was destroyed in the World Trade Center attack.
"They are trying to plug as many holes in the dam as possible, especially in corporate travel," said Jennifer Scutti, an analyst at CIBC World Markets who tracks the company.
"The company has bet a lot on cost saving for next year's numbers, and this is going to be something that is very hard for them to achieve. Obviously they're still displaced from Sept. 11."
The job cuts, for which the company is taking up to a $280 million restructuring charge, are on top of the 7,700 cuts announced earlier this year. That brings the number of job cuts set this year to 13,200 to 14,200, or 15 percent of its work force, Amex said.
The company expects the moves will save $230 million to $260 million in 2002 and as much as $315 million in 2003 before taxes.
Financial firms, which have been faced with declining business given the slowing economy all year, faced even tougher declines following the Sept. 11 attacks as companies and individuals pulled back, bracing for a protracted slowdown.
Despite the gloomy outlook, Amex Chief Financial Officer Gary Crittenden told analysts during a conference call Wednesday that the job cuts will not affect customer service.
"Let me assure you that is not the case," Crittenden said. "The decision to take an additional charge this quarter reflects the slowdown in the travel-related industry since Sept. 11. We're trying to appropriately size our infrastructure to sales levels since Sept. 11."
Crittenden added that the cuts also come on top of the company's decision to freeze salary raises for managers in 2002.
CIBC's Scutti said the cuts were not all that surprising since indicators point to a longer-than-anticipated recovery for the travel industry, a situation likely to place increased pressure on Amex's bottom line.
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Scutti, who maintains a "hold" rating on Amex, said the stock is overvalued beyond $32.
Amex said travel sales declined 46 percent in October from a year earlier and 38 percent in November.
Additionally, the company said credit trends are likely to show modest deterioration in step with rising unemployment. Sales and financial planning levels at American Express Financial Advisors also declined in September, remaining weak through November.
Though the company has increased its assets under management compared with a year ago, it has reduced exposure to riskier high-yield securities, which is expected to reduce overall investment portfolio yields. 
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