AmEx's life after Costco now includes Sam's Club

Seven months ago, Costco Wholesale (NASDAQ:COST) and American Express (NYSE:AXP) said they would end their 16-year cobrand and merchant acceptance agreements next year. This week, Costco's leading competitor, Walmart (NYSE:WMT) division Sam's Club, said it will start accepting AmEx cards on Oct. 1, long before the Costco deal ends next April.

Unlike Costco, AmEx will not have the same degree of exclusivity at Sam's Club, but the move indicates that leading players in the wholesale club channel are expanding payments options. Last year, Sam's Club ended a 10-year relationship with Discover Financial Services, adding MasterCard and a multiyear agreement with GE Capital Retail Bank to manage its cobranded credit cards.

Costco reported that Visa would replace AmEx as its credit card network of choice next year, with Citigroup issuing the cobranded cards. In the process, the merchant drastically reduced its credit card acceptance costs.

The loss of the Costco business led to a sharp drop in AmEx's stock price because of the resulting lost revenue. AmEx's stock closed up slightly following the Sam's Club news, Investor's Business Daily reported.

AmEx will now be accepted at the over 650 Sam's Club locations in the U.S. and Puerto Rico. Costco has 480 stores, but has higher total sales.

"We strive to give more value to our members—more savings, great experiences and quality merchandise," said Tracey Brown, chief member officer of Sam's Club, in a statement. "The acceptance of the American Express Card underscores our commitment to bring greater ease and flexibility to our members' shopping experience. American Express—known for their exceptional customer service, loyal, higher-spending card members and advocacy of small businesses—will help to extend the value of membership."

AmEx's advocacy of small merchants includes providing support through products and programs such as Small Business Saturday, Shop Small, Merchant Financing and OptBlue, the company's small-merchant acquiring program that enables easier card acceptance. AmEx has 55 million cards in the U.S. market, and offers rewards and benefits to its high-spending and loyal card members.

"We are constantly looking for ways to expand the places where our card members can shop and bring more convenience and value to their everyday lives," said Anré Williams, AmEx's president, global merchant services. Sam's Club shares AmEx's focus on customers, serving 500,000 small-business owners every day, he said.

"Their nationwide presence provides more shopping choices to our consumer and small-business card members, giving them access to great products, brands and services. We look forward to working with Sam's Club to help them reach new customer segments and deliver rich marketing benefits," Williams said.

Sam's Club has a new strategy: be less like Walmart and target wealthier shoppers with more organic food, brand-name apparel and upscale furniture, The Wall Street Journal reported.

In its most recent quarter that ended July 31, Sam's Club reported $14.73 billion in sales. Costco reported $25.52 billion in revenue for the quarter ending May 10. In Sam's Club most recent fiscal year, the wholesale club reported a 0.5 percent sales increase in stores open at least a year, compared to Costco's 6 percent gain.

For more:
-See this American Express press release
-See this Investor's Business Daily article
-See this article in The Wall Street Journal

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