(Updates with recast first paragraph, more results and outlook,
share price.)
DOW JONES NEWSWIRES
Alliance Data Systems Corp. (ADS) posted a 44% decrease in
first-quarter net income as sliding revenue in its loyalty-services
and private-label credit units outstripped a modest decrease in
overall operating expenses.
The company had previously recorded strong results from frequent
flier and loyalty programs, as consumers increasingly turned to
programs that give back for spending as they look to trim their
budgets. But that trend didn't hold up this quarter.
Still, its earnings excluding items, were better than the
loyalty-program and private-label card operator expected, and the
company predicted continuing strength in its loyalty services
throughout the year.
Net income fell to $27.9 million, or 45 cents a share, compared
with $49.3 million, or 61 cents a share, a year earlier.
Excluding stock-based compensation and other one-time items,
cash earnings were $1.19 a share, compared with the $1 a share it
earned a year earlier and the $1.10 a share the company and
analysts had been expecting.
Revenue slipped 4% to $480 million, below the $488 million
analysts polled by Thomson Reuters had been expecting. Excluding
currency exchanges, revenue would have increased 4%.
Total operating expenses fell less than 1% to $378.5
million.
In its loyalty-services segment - which operates frequent-flier
programs and gasoline credit cards - adjusted earnings before
interest, taxes, depreciation and amortization rose 34%, though
revenue fell 7% as foreign currency exchanges hurt the results. The
company said it had an increase in flier miles redeemed, but miles
issued dropped. It added it didn't believe the economic environment
was playing a role in redemption behavior.
The Epsilon segment - which provides loyalty programs for a
range of companies including Barnes & Noble Inc. (BKS) and
Pfizer Inc. (PFE) - posted a 6% decrease in adjusted earnings on a
2% rise in revenue as the company said the year-ago results were
strong and the latest quarter "tracked" expectations.
For the private-label credit segment, revenue slumped 11% and
earnings tumbled 34%, while its smaller private-label services unit
saw revenue rise 4% and earnings rise 11%.
For the second quarter, the company said it is expecting cash
earnings of about $1.05 a share, below the $1.22 analysts had been
projecting. And Alliance Data said it is maintaining its full-year
guidance of earnings of "at least" $5.15 a share, though it had
previously called for a range of $5.15 to $5.20.
The company said it expects the loyalty-services segment to post
strong results in the future as consumers finally make purchases
they have been deferring, and flier miles awarded rebound. It also
said the Epsilon segment still remains on track and private-label
services should show moderate growth.
Alliance Data shares have somewhat recovered from last year's
steep fall, now down 22% over the past 12 months after nearly
doubling in the past month. Much of the gains have come just as the
company put in place a new chief executive, Edward Heffernan, who
took over March 1 when J. Michael Parks moved to the sole role of
chairman.
Shares fell 2.6% in the regular session and were unchanged in
after-hours trading.
-By David Benoit, Dow Jones Newswires; 201-938-2472;
david.benoit@dowjones.com