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Costco Dumps American Express; Investors Don't Like It

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American Express Company (NYSE: AXP)'s exclusive U.S. credit card agreement with Costco Wholesale Corp. (NASDAQ: COST) will end next year, the company said on Thursday.

American Express shares are down almost 6 percent on the day.

"We were unable to reach terms that would have made economic sense for our company," American Express Chief Executive Kenneth I. Chenault said of the deal, now set to expire March 31, 2016.

The company began discussions on renewing the co-branded card agreement "well in advance of the contract expiration," Chenault said.

American Express listed Costco among its key business partners in its most recent annual report and said competition for such co-branded relationships "is very intense."

Reports surfaced in November that the Costco agreement was in trouble.

Costco earlier last year dropped a similar, smaller exclusive arrangement with American Express at its Canadian operations in favor of a new partnership with Capital One Financial Corp. (NYSE: COF) and Mastercard Inc. (NYSE: MA).

RBC's Jason Arnold speculated at the time that the loss of Costco business in the U.S. "certainly will represent a significant relationship loss for AmEx."

The company also maintains a co-branded card agreement with Delta Air Lines Inc. (NYSE: DAL), Starwood Hotels & Resorts Worldwide Inc. (NYSE: HOT) Hilton Worldwide Holdings Inc. (NYSE: HLT) and Lowe's Cos. (NYSE: LOW), according to its most recent annual report.

Posted-In: News Contracts


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