Alliance Data Systems (ADS) Tops Q2 EPS by 83c, Revenue Misses

July 23, 2020 7:31 AM EDT

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Alliance Data Systems (NYSE: ADS) reported Q2 EPS of $1.86, $0.83 better than the analyst estimate of $1.03. Revenue for the quarter came in at $979 billion versus the consensus estimate of $1.15 billion.

SUMMARY AND OUTLOOK:

"Alliance Data is moving forward thoughtfully within today's uncertain business environment, adapting to and supporting the needs of our enterprise clients and cardmembers while strengthening our financial position and investing strategically to drive future growth," said Andretta."In Card Services, we are working closely with clients on adjusting in-store and online strategies and marketing plans that are most relevant to consumers' changing shopping behaviors during this time. Home décor and beauty continue to be strong-performing verticals. We have signed multi-year Private Label Credit Card ("PLCC") renewals including The Tile Shop, a specialty retailer of natural stone and man-made tiles and related materials. We launched a new PLCC commercial card program with Floor & Decor, offering financing plans and enhanced controls and functionality for small business owners. We also signed a new multi-channel PLCC agreement during the quarter with SalonCentric, a wholly-owned subsidiary of L'Oréal. SalonCentric is one of the largest U.S. wholesale distributors of professional salon and beauty supplies, with nearly 600 stores nationwide and a robust ecommerce channel.

"In our AIR MILES business, we are supporting Collectors and Sponsors by pivoting the reward portfolio to reflect more non-travel options. The business continues to renew with Sponsors, including a multi-year national renewal with Shell Canada Products, as it focuses on driving Collector engagement in key categories such as gasoline, grocery and liquor, which are deemed essential services. For our Netherlands-based BrandLoyalty business, the grocery vertical remains strong as an essential consumer shopping category."

Andretta continued, "Turning to expense management efforts, I am pleased to report that we achieved year-over-year cost savings of approximately $140 million in the first half of 2020, and we expect to realize additional cost savings in the second half of this year derived primarily from ongoing operating and procurement efficiencies. Based on recent trends and current visibility, we reaffirm our expectation that Alliance Data will remain EBT and cash flow positive in 2020, with sufficient liquidity to manage through a period of anticipated significant stress. We expect to enter 2021 as a much leaner organization with a flexible corporate structure that can respond quickly to changes in market dynamics.

"Additionally, we are making strategic investments in people, data management tools and digital capabilities that will further improve our competitive position and drive future growth. We are pleased to announce that financial services veteran Valerie ("Val") Greer has joined Alliance Data as the Chief Commercial Officer, responsible for attracting and retaining brand partners and cardmembers, and driving profitable growth for the business. Most recently, Val headed the co-brand card business at Citi and was responsible for driving significant growth. The investments we are making underscore our commitment to restoring revenue growth and improved profitability over the long term," Andretta concluded.

For earnings history and earnings-related data on Alliance Data Systems (ADS) click here.



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