Investing.com -- Shares in American Express Company (N:AXP) slid more than 12% on Friday, one day after the multinational credit card company reported dismal earnings for the final quarter of 2015, prompting CEO Kenneth Chenault to assert that significant changes within its operations will be made immediately.
In Friday's session, American Express plunged 7.59 or 12.12% to 55.05 suffering its worst one-day fall in nearly seven years. With the sharp declines, the Manhattan-based financial services company dropped to its lowest closing level since November, 2012. Although the Dow Jones Industrial Average surged by more than 1.25% on Friday to close higher for the week, American Express shaved off 50 points from the rally.
A day earlier, the company reported earnings of $889 million for the fourth quarter down by nearly 40% from the same period a year earlier. While American Express narrowly topped analysts' revenue forecasts for the period, its quarterly sales still slumped by 7.6% to $8.39 billion. The world's largest credit card issuer by volume is coming off a challenging year marred by an unfavorable ruling in a federal antitrust lawsuit and the impending termination of its 16-year exclusive relationship with Costco Wholesale Corporation (O:COST).
Costco ended the partnership last March when it reached a deal with Citigroup Inc (N:C) to become the exclusive issuer of its branded credit cards, replacing American Express with V, its chief competitor. At the time, the Costco-branded cards represented about one-tenth of all American Express credit cards in circulation.
“Our 2015 results and outlook reflect the reset in co-brand economics, pressures on merchant fees, the evolving regulatory environment and intense competition that have been re-shaping the payments industry,” Chenault said in a statement.
"A number of cyclical factors in the broader economy have also weighed on our performance and influenced our outlook. Against that backdrop, and the fact that revenue growth has not accelerated as we anticipated, we are moving aggressively to streamline the company and drive efficiencies in order to take out $1 billion from our overall cost base by the end of 2017."
While speculation has mounted that the recent struggles could lead to Chenault's ouster, any changes at the top of the company may need approval from Warren Buffett. With a 15% stake in American Express, Buffett is the company's largest shareholder.
Moving forward, American Express expects per share earnings of 5.40 to 5.70 in fiscal year 2016 and is targeting annual earnings per share of at least 5.60 for 2017.
"We have a great set of assets to draw upon, including a trusted brand, financial strength, an integrated business model, world class service and a history of innovation," Chenault said. "We’re confident that we’ll not just deal with our near-term challenges, but return to growth and position the company for long-term success."